Hong Kong exports to the U.S. should increase because Japanese goods become more expensive to U.S. importers as a result of yen appreciation. This answer assumes that Japanese exporters did not reduce their prices to compensate U.S. importers for the weaker dollar. If Japanese exporters do reduce their prices to fully offset the effect of the stronger yen, there would be less of a shift to Hong Kong goods. Assuming that U.S. bond prices are normally inversely related to U.S. inflation, offer your opinion on why expectations of a weak dollar can reduce bond prices, other things being equal. Expectations of a weak dollar can cause expectations of higher inflation, because a weak dollar places upward pressure on U.S. prices for reasons mentioned in the chapter.
Higher inflation tends to place upward pressure on interest rates.
Because there is an inverse relationship between interest rates and bond prices, bond prices would be expected to decline. Such an expectation causes bond portfolio managers to liquidate some of their bond holdings, thereby causing bond prices to decline immediately. The Argentine peso is tied to the U.S. dollar. If the values of currencies change against the dollar, they will also change by the same degree against the Argentine peso, which will affect trade and capital flows in Argentina. The ECB could sell euros in the foreign exchange market, which may cause the euro to depreciate against other currencies, and therefore cause an increase in the demand for European imports.