Response to the following problem:
Weighing the Influence of Factors on Exchange Rates
The New Zealand dollar's spot ratewas equal to $.60 last month. New Zealand conducts much international trade with the U.S. but that the financial (investment) transactions between the two countries are negligible. Assume the following conditions have occurred in the last year.
First, interest rates in New Zealand increased but decreased in the U.S.
Second, inflation in New Zealand increased but decreased in the U.S.
Third, the New Zealand central bank intervened in the foreign exchange market by exchanging a very small amount of U.S. dollars to purchase a very small amount of New Zealand dollars.
How should the New Zealand dollar change over the year based on the information provided here?