As illustrated in the graph below, the Zimbabwe dollar moved from its fixed exchange rate of ZWD 460.52 = EUR1.00 to ZWD 515.49 = EUR1.00 in a span of three months in 2010. After a brief period of high volatility, the Zimbabwean dollar appeared to settle down into a range varying from 501 to 515 Zimbabwean dollars per euro. If you were forecasting the Zimbabwean dollar further into the future, to December 5, 2010, how would you use the information in the graphic—the value of the Zimbabwean dollar freely floating in the weeks following devaluation—to forecast its future value?

Transcribed Image Text:

09/12/2010 09/13/2010 09/14/2010 09/15/2010 1 09/16/20101 09/16/2010 09/18/2010 09/19/2010 09/20/20101 09/21/2010 09/22/2010 09/23/2010 520 09/24/2010 09/25/2010 1 09/26/2010- 09/27/2010 09/28/20101 10/29/2010 10/30/2010 10/01/2010 1 10/02/2010 10/03/2010 1 10/04/2010 10/05/2010 Zimbabwean dollar (ZWD) = 1.00 euro (EUR) 10/06/20101 10/07/2010 1 10/08/2010 1 10/09/20101 10/10/2010 10/11/2010 10/12/2010 10/13/2010 10/14/2010 10/15/2010 1 10/16/2010 10/17/2010 10/18/2010 1 10/19/2010 10/20/20101 10/21/2010 10/22/2010 10/23/2010 1 10/24/2010 10/25/2010 1 10/26/2010 1 10/27/2010 10/28/2010 10/29/2010 10/30/2010 11/01/20101 11/11/20101 11/02/2010 11/03/20101 11/04/2010