Economic Fluctuations In The Exchange Rate Trend Analysis

The article starts with the question whether there is a certain relationship between economy shock and exchange rate fluctuation. The determination and fluctuation of exchange rate is the synthetical outcome of various economic variables ,meanwhile has its own functional peculiarity.With the new era ,the volatility exchange rate is coordinated with the economic circumstance during the business cycle transition in developed countries, which indicates the relationship between economy and exchange rate.Firstly, having reviewed the basic facets of three economy areas –USA,Europe and Japan, the article improves the connection between the economy and exchange rate, after all it is intuitionistic and general. Obviously, further discussion should be provided to explain the exchange rate how to move during the boom stage and stagnancy stage within business cycle.The emphasis of the article lies in the investigation and test of the determination of exchange rate. Rooted in many economic indicators, the article issues the conclusion: balance of payments and economic growth are the determinates in the long run ,interest rate is the determinate in the short run ,and the divergence of price between countries is the essential factor. The article turns to time serial analysis model, which is aiming to test the regression between capital inflows and exchange rate; Another model is identified to show the pertinency between exchange rate and interest rate.Finally , basing on investigation above , the article try to forecast the walk tendency of three key currencies- Dollar, Euro, and Japanese yen.