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Explain the trajectory of the exchange rate

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Assume Isuzu produces a car in Japan for ¥1.8 million. On June 1, when new models are introduced, the exchange rate is ¥150/USD. Consequently, the automaker sets the sticker price for the car at USD 12,000. By August 1, the exchange rate has dropped to ¥125/USD. Isuzu is worried that it will receive fewer Yen per sale (USD 12,000 * ¥125/USD = ¥1.5 million).

What scenario(s) could explain the trajectory of the exchange rate?

Reference no: EM132554492

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