short-term volatility and longer-term swings in exchange rates that “overshoot” values
justified by fundamental conditions may hurt their economies, particularly sectors
heavily involved in international trade. And, the foreign-exchange market can be volatile.
For example, one euro cost about $1.15 in January 1999, then dropped to $0.85
by the end of 2000, only to climb to over $1.18 in June 2003. Over this same period,
one U.S. dollar bought as much as 133 yen and as little as 102 yen, a 30 percent
fluctuation. Many other currencies have also experienced similarly large price swings
in recent years.
Many central