Exchange Rate Diagram Maker
Exchange rate diagrams apply supply and demand to a currency market: the price axis becomes the exchange rate (e.g. USD per EUR) and the quantity axis the quantity of currency traded. Appreciations and depreciations are just demand and supply shifts, but mislabelling the axes is the classic way to lose easy marks.
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IB EconGraph AI relabels everything for a currency market from a single prompt and shifts the right curve for your scenario, whether it's rising interest rates, import demand, or central bank intervention.
What the exchange rate diagram shows
A floating exchange rate diagram for, say, the euro shows:
- Demand for EUR: from foreigners buying eurozone exports, assets, or travelling there, downward-sloping against the exchange rate.
- Supply of EUR: from eurozone residents buying imports or investing abroad, upward-sloping.
- Equilibrium exchange rate: where the curves cross, e.g. 1.10 USD/EUR.
- Appreciation: demand shifts right (or supply left) to higher exchange rate.
- Depreciation: demand shifts left (or supply right) to lower exchange rate.
How to draw it in IB EconGraph AI
- Prompt: "market for the British pound after an interest rate rise, showing appreciation", the AI labels axes as $ per £ automatically.
- Or start from the supply-and-demand template and double-click the axis labels to change them to "Exchange rate (USD/EUR)" and "Quantity of EUR".
- Shift the appropriate curve and mark both equilibria (e₁ to e₂) with dotted lines.
- Add an arrow annotation showing the appreciation/depreciation direction.
- For managed rates, add a horizontal intervention line and discuss reserves in your commentary.
IA & exam tips
- Currency articles pair this diagram with the AD-AS model (a depreciation boosting net exports shifts AD right), keep both graphs in one project.
- Always state the exchange rate as a ratio in the axis label (USD per EUR), ambiguous labels are penalised.
- Central bank intervention articles: draw the rate the bank defends and the excess demand/supply it must absorb, similar to a price control.
Frequently asked questions
Which curve shifts when interest rates rise?
Higher domestic interest rates attract foreign capital: demand for the currency shifts right (and supply may shift left as residents keep funds at home), an appreciation. Describe the scenario and the AI shifts the correct curve.
Can I draw a fixed exchange rate?
Yes, add a horizontal line at the pegged rate, like a price control, and mark the intervention gap.
Does this work for any currency pair?
Yes, all labels are editable, so any base/quote pair works.
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