Estimating Rates for Retirement Planning Example of Profiting on a Forex Trade

Example of Macroeconomics on Forex Trading

Imagine that the United States and Japan, two long-established trading partners, have to purchase each other's goods with the respective currencies: the yen for Japan and the dollar for the United States. If the United States spend more money on imported Japanese goods than it received from selling exports, it will not have enough yen to pay for the goods and assets it wants to buy. This means that there is a shortage of yen, which will push up the value of the yen until Japanese exports become more expensive than those from the United States and the yen loses value compared to the dollar.