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What will happen to the exchange rate

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Reference no: EM132518418

Considering the following scenario:

  1. The US dollar is trading at $1.45 per euro,
  2. Interest rate is 8% in euro but 4% in the US
  3. The ECB rises interest rate by 2%,

Question 1: What will happen to the exchange rate (assuming that the expected future exchange rate is unchanged)?

Reference no: EM132518418

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