Draw the graph · Macro · Foreign exchange market
Americans holiday in Europe
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.
To buy euros, Americans must sell dollars. At every exchange rate they offer more dollars than before, so the supply of dollars shifts right. The demand for dollars is unchanged. The exchange rate falls, and a lower price of the dollar in euros is a depreciation.
The dollar depreciates against the euro and more dollars are traded.
Common mistake. A common error is to shift the demand for dollars, or to draw this in the euro market. In the dollar market, Americans buying euros are sellers of dollars. That is supply.
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Lesson: Trade & Exchange Rates