Question: Using the USD to EUR exchange rate pair: (https://www.xe.com/currencycharts/?from=USD&to=EUR) Explain what a direct quotation is and what an increase or decrease of direct quotation means

Using the USD to EUR exchange rate pair: (https://www.xe.com/currencycharts/?from=USD&to=EUR)

  1. Explain what a direct quotation is and what an increase or decrease of direct quotation means in terms of home and foreign currency/exchange rate.
  2. Analyze the currency pair/exchange rate over the period of 1 year, 5 years and 10 years. What can you see? Is there any substantial appreciation of depreciation of home or foreign currency? If there is, can you think of reasons for this or provide reasons?
  3. If you compare between 1, 5 and 10 years, is the currency pair/exchange rate more volatile over 1 year or over 10 years? Is that in accordance with what theory suggests?

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