Draw the graph · Macro · Foreign exchange market
Americans buy more imports
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.
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Demand for the currency stays put. Supply of the currency shifts right.
European sellers want euros, so American importers must sell dollars to buy euros. At every exchange rate more dollars are offered, and the supply of dollars shifts right. The demand for dollars is unchanged. The dollar depreciates.
The dollar depreciates against the euro and more dollars are traded.
Common mistake. Students sometimes shift the demand for dollars left because 'Americans want fewer dollars.' Americans are supplying dollars to get euros. Demand for dollars comes from the European side.
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Lesson: Trade & Exchange Rates