The answer is the exchange rate, world demand for U.S. exports, interest rates in the U.S. and other coutries, and the expected future exchange rate
What causes the demand for dollars to increase?
- Because the dollar is the world's reserve currency, demand for it is generally strong. Inflation rates, trade deficits, and political stability are all elements that determine whether or not the dollar gains value in compared to other currencies.
- Higher interest rates often raise the value of a country's currency. Higher interest rates tend to entice foreign investment, raising demand for and the value of the local currency.
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