The Impact of Economic Factors on the Foreign Exchange Rates between USA and Four Big Emerging Countries: China, India, Brazil and Mexico

Abstract

This study examines the impact of macro-economic factors on the foreign exchange rates between USA and four big emerging countries: India, Mexico, Brazil and China for the period of 2005 to 2014. This study uses Enter and Stepwise multiple regression methods to investigate the impact of market fundamental on the exchange rates.  The empirical findings reveal that the macro-economic factors significantly predict and influence the exchange rates between USD/CNY (US dollar/Chinese yuan), USD/INR (US dollar/Indian rupee), USD/BRL (US dollar/ Brazilian real), and USD/MNX (US dollar/Mexican pesos).  It is crucial to emphasize that the macroeconomic policies have to be implemented in order to stabilize and reduce the exchange rates volatilities.