Suppose you are a financial manager stationed in a foreign country and your boss at headquarters in New York asks you to make a prediction about the future exchange rates in the country you are currently in. You see that the economy in the country you are in has started to grow more rapidly with a lot of new foreign investments. You also see that prices are much lower in this country than they are back in the U.S. For example, you see that the price of a big mac at McDonalds is half of what it costs you at home. Would you tell your boss that you expect the value of currency in this country will increase or decrease?

Question

Suppose you are a financial manager stationed in a foreign country and your boss at headquarters in New York asks you to make a prediction about the future exchange rates in the country you are currently in.  You see that the economy in the country you are in has started to grow more rapidly with a lot of new foreign investments. You also see that prices are much lower in this country than they are back in the U.S.  For example, you see that the price of a big mac at McDonalds is half of what it costs you at home. Would you tell your boss that you expect the value of currency in this country will increase or decrease?