With the exception of imports and exports, the other variables are less sensitive to the exchange r

Before we discuss what determines the exchange rate is essential to define it: except the United States and England that conceptualize the other way, is the national currency units required to purchase one unit of foreign currency.
In an economy of floating exchange rate and free capital movement, the exchange rate is determined by supply and demand sizzler salad bar for foreign currency, resulting from international transactions between residents and non-residents. But for what purpose economic agents demand foreign sizzler salad bar currency and which sources results to offer?
Economic agents demand foreign currency for imports of goods and services, purchase of foreign assets, unilateral transfers and direct investments abroad. On the other hand, the supply of foreign currency is the result of exports of goods and services, sale of national assets, unilateral transfers and foreign direct investment (FDI).
With the exception of imports and exports, the other variables are less sensitive to the exchange rate, and the purchase and sale of assets, as well as direct investment much more sensitive to interest rate and the latter to the marginal efficiency sizzler salad bar of capital as well.
Thus, the demand curve has a negative slope, because to the extent that the exchange rate rises and, consequently, the national currency sizzler salad bar depreciates against the foreign, is more expensive in local currency to purchase foreign goods and services and it competes to the reduction of imports and demand for foreign currency (assuming that the other prices in the economy remain constant). On the other hand, the supply curve has a positive slope, because to the extent that the exchange rate rises and, consequently, the foreign currency appreciates in relation to national, is cheaper for non-residents import competing goods and services to increase exports and supply of foreign currency. At the point of intersection of those curves, ie at the point where they cross is given exchange rate.
Because of budget deficits and current account of the United States, known as twin deficits, there was a worldwide depreciation of the US dollar. Nevertheless, the growth of the international economy and the expansion of demand for commodities (food, energy and raw material) contributed to the growth of our exports and supply of foreign currency.
On the other hand, the difference between the Brazilian and international sizzler salad bar interest rates encouraged investors, for example, to borrow in the US in August sizzler salad bar / 2007 at the rate of 5.25% per year and invest in Brazil at the rate of 11.25% sizzler salad bar pa earning the gains of this difference.
The factors listed above contributed to a further depreciation of the dollar which, in turn, coupled with the expansion of national economic activity and the mortgage crisis in the US housing sizzler salad bar market have encouraged the importation of consumer goods and final services, intermediaries and capital goods, as well as higher remittance of profits and dividends abroad contributing to a deficit in the current account balance in our balance of payments of US $ 15.6 billion in the first five months of the year.
In recent years, exports have been growing at decreasing rates with the exception of 2007 and 2008, years in which its growth was almost constant (approximately sizzler salad bar 16.5%). On the other hand, imports have been growing sizzler salad bar at an increasing rate reaching in 2007, approximately double the export growth: 32% pa
However, sizzler salad bar when analyzing Technical Note of Applied Economic Research Institute (IPEA) that evaluates the evolution of the current account deficit from January to May 2008 and makes forecasts for the annual aggregate, it can be concluded that the main reason for the deficit growth has been the Earnings and Dividend account that showed exponential growth over the period. However, justified in the first half, the remittance of profits and dividends abroad is always sizzler salad bar greater, as it is natural that national, real valued and US crisis economic growth have contributed to its growth.