Basics of Exchange Rates

During the second half of 1997, currencies and stock market prices plunged in value across Southeast Asia, beginning in

A) a foreign demand for dollars and the satisfaction of this demand decreases the supplies

The value of the dollar rising or falling to a country depends on market forces and economics in that country. The reasons why the dollar is rising or falling decides the desirability of the dollar rising or falling. When compared to another country's currency, it can determine whether it is an advantage or disadvantage to the country's economy. The reasons why the dollar is rising or falling can also determine a weak or strong economy and can affect the economy in good and bad ways.

International transactions, balance of payments between countries and economic strength are harder to gauge on a daily basis, but they play a major role in longer-term trends in many markets. The currency markets are a gauge of how well one country 's currency and economy is doing relative to others. A high demand for a currency means that currency will rise relative to other currencies.

8. How can a central bank peg the value of its currency relative to another currency?

However, speculation can only be expected to smooth exchange rate movements if underlying economic processes are relatively stable. If there is a great deal of uncertainty over future government actions and their economic impact, expectations will not be strongly held. Thus expectations can change dramatically from day- to-day, leading to rapidly fluctuating exchange rates.

Understanding the relationships among world currencies is vital to successful operations in a global economy. There is money to be made by managers who can effectively manage exchange rates in the course of their business dealings. There is money to be lost by managers who fail to recognize the significance of these rate relationships.

CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. The basket of goods is a price survey that is taken from 10,000 households across the UK. The households are asked to record what they buy for two weeks and from this the 699 most occurring goods from all households are price checked from varying places across the UK and then are placed into the basket of goods. The goods are weighted according to their importance i.e. petrol would be more important than CDs and would therefore be more

Where the U.S. dollar-euro exchange rate has been in the past several decades from 1999-2014 is as follows. Ever since the euro was created in January of 1999, the value of it has equaled to $1.17. In October of 2000, the dollar was gaining strength when the euro was just $0.88. Afterwards the dollar continued to decline against the euro by 39% from 2001 to 2004 (Islam, 2005). However, in 2005 the dollar rose, but negative outlooks began to occur during the Great Recession in 2006. As the dollar started to decline in 2006 before the subprime mortgage crisis, capital flows caused more volatility in dollar-euro exchange rate market forcing individuals to deal with this economic situation (Harvey,

Chapter 1 Multinational Financial Management:An Overview 1. The commonly accepted goal of the MNC is to:  A) maximize short-term earnings.   B) maximize shareholder wealth.   C) minimize risk.   D) A and C.  E) maximize international sales.

Absolute PPP maintains that the price level between two countries is equal as the exchange rate is equilibrated between

China’s Central Bank had devalued the Yuan by nearly 2% for the second time in August 2015. Having a currency called the “Yuan”, China has one of the most successful economies of our time. Their structural reform in the late 1970’s and their integration with the WTO (World Trade Organisation) has enabled them to fully integrate with the world market and obtain several advantages leading to them being an export oriented economy (Yang Yao, 2011). China’s devaluation has had significant effects on its own economy and the rest of the world such as making its exports cheaper and affecting the aggregated demand of China. The devaluation of the “Yuan” will also have an effect upon the imports by making them more expensive. In this essay these effects will be analysed to a greater extent.

Finance plays and important role in our day-to-day routine. Considering the value of money, countries and people have started investing them into other countries and shares. Investing money in other countries is principally dependent on currency exchange rates.

By definition, an Exchange rate is “The price of a nation’s currency in terms of another currency” (1). It is one of the most important measurements for determining a country’s economic strength, and it impacts people’s daily life too. As a foreign student studying in America, we have to pay very close attention to the exchange rate, and this promoted our interests in why exchange rate is floating all the time. In general, exchange rate can be affected by many factors include inflation rates, interest rates, or government policies. But in this paper, we’re focusing on the relationship between exchange rate and political decisions.

The currency exchange rate is one of the most important elements of a country’s relative level of economic health and can be affected by many factors. The factors are differentials in inflation, differentials in interest rates, current-account deficits, public debt, terms of trade, political stability and economic performance.