Calculate the appreciation of the yen and the depreciation

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Reference no: EM13330610

Due to fears of the unwinding of the yen-carry-trade, the fall in the value of USD against the JPY in the mid August of 2007 was causing the stock market turmoil around the globe. In fact, the USD dropped against the JPY from 118.08 to 113.58 in 2days. Anticipating the fall in the dollar, the Central Bank of Japan purchased $20 billion dollars prior to that drop in the dollar, and the Federal Reserve borrowed the yen and purchased another 10 billion dollars. As the markets are so much bigger than even the strongest Central Banks, that obviously did not prevent the drop in the dollar.
a. Calculate the appreciation of the yen and the depreciation in the dollar in that short period
b. Calculate the losses of the Central Bank of Japan in yen and the US Fed in dollars over that period

Reference no: EM13330610

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