You are currently employed in coffee trading company that buys and sells coffee in international markets and they have hired you because of your claim that you understand how the foreign exchange markets work. Your company has preferred purchasing partners in the following 5 countries

1. Brazil (Brazilian Real)
2. Vietnam (Vietnamese Dong)
3. Colombia (Colombian Peso)
4. Indonesia (Indonesian Rupiah)
5. Ethiopia (Ethiopian Birr)

These happen to be the top 5 producers of coffee beans in the world. The name of their currencies are enclosed in the corresponding parentheses.

The research department of your company has provided you with the following tables. The first one shows the current exchange rates and what they believe will be the exchange rate in 3 months. The second shows the degree of volatility exhibited by the 5 currencies in the last 6 months, where a higher number implies more fluctuation.

Table 1: Current Exchange rates and 3 month projections

Country

Exchange rate

Today

3 Month Projection

Brazil

3.80 Reals per dollar

4.20 Reals per dollar

Vietnam

23,205.35 Dongs per dollar

23,025.00 Dongs per dollar

Colombia

3,163.75 pesos per dollar

3,001.25 pesos per dollar

Indonesia

14,766.90 Rupiahs per dollar

15,000.00 Rupiahs per dollar

Ethiopia

27.82 Birrs per dollar

25.82 Birrs per dollar

Table 2: Exchange rate volatility

Country

Exchange rate 6 month variation

Brazil

12%

Vietnam

8%

Colombia

36%

Indonesia

49%

Ethiopia

18%

Given your company's interests, you have been asked to use the information above to answer the following questions that are of some concern

Suppose a week after you get this report from your research department, you hear on the news that Colombia and Vietnam are going to increase money supply to stimulate their economy while the United States is keeping its money supply stable, you would expect that

a.the 3 month projections for the peso would be smaller while that of the dong will be larger

b. the 3 month projections for the peso and dong will be smaller

c. the 3 month projections for the peso and dong will be larger

d. the 3 month projections for the peso would be larger while that of the dong will be smaller

e. Both projections will be the same since the US is keeping their money supply fixed