Discuss currency exchange rate movements during the second half of 2008. Did the U.S dollar strengthen or weaken versus major currencies such as, British pounch, Euro, Australian dollar, and Yen?...

Currency movements are decided by demand and supply factors in a
macroeconomic setting. If the demand for a currency increases, the value
appreciates. Since advanced economies were the ones that were most hit by the
crisis, it was mainly their currencies that weakened. And the ripple effect caused
fluctuations throughout the world.
When the markets were in a crisis, the level of debt in developed markets rose more
than 100% of GDP. This raised questions regarding the “sustainability” of debt and
investors then start getting jittery about the safety of their investments. They started
withdrawing their money from such countries and instead were looking for safer
investment options. Another factor that causes fluctuations in exchange rates is the
level of current account deficit. The more the deficit, the higher the currency
depreciates.
US dollar is an attractive prospect for investors as it considered to be a safe haven
investment because of the economic and political power...