Explain how the following events would effect the market for South Africa's currency, the rand, assuming a floating exchange rate.
Question 1) A rise in the US inflation causes many US residents to seek to buy gold, which is a major South African export, as hedge is against inflation.
- The rand appreciates
- The rand does not change in value
- The rand depreciates
Question 2) Major discoveries of the highest quality diamonds ever found occur in Russia & Central Asia, causing a significant decline in purchases of South African diamonds.
- The rand appreciates
- The rand does not change in value
- The rand depreciates
Question 3) Which of the following 2 events could have generated the decrease in the demand for the baht?
- A reduction in foreign purchases of Thai export goods
- An increase in foreign purchases of securities issued by Thailand's government
- An decrease in foreign purchases of financial services provided by Thai banks.
- An increase in foreign purchases of Thai stocks and bonds.