Chapter 9

If, for example, money must be converted to another currency to make a certain investment, any changes in the currency exchange rate cause that investment's value to either increase or decrease when the investor sells and converted back into the original currency. This is a crucial concept that cannot go undiscussed every time a foreign direct investment subjects. This is especially for a foreign country because changes in the currency rates of the investment target country, where an international enterprise invests, translates into changes in the value of the investment

International trading of currency within different countries has some of the same terms with the same meaning. None the less, although each country has a monetary system, problems can still arise whenever the exchange of capital is taking place remotely. Brigham

selected currencies is one of the approaches to make money. For the past many years,

Foreign exchange and commodity linked notes -where investors could capitalize on the fluctuating cost of underlying currencies or commodities (e.g. gold, silver, sugar and oil).

Forward contract. Lock in an exchange rate with the bank until a certain future date, with currency projections against the spot rate though.  In this case had an option to have Forward contracts, which allow Nodal fixed exchange rates in the future at no charge, the bank may impose a fee

A country using the floating rate of exchange for its monetary allows its money to be traded in the money market at exchange rates fixed by the daily forces of demand and supply for such money. The monetary unit is allowed to seek its own price level.

The foreign exchange market can be defined as the collective activity of exchanging currencies i.e. where currencies are bought and sold. The price for the currency is known as the exchange rate.

A country taking part during this system required official reserves government or financial organization holdings of gold and widely accepted foreign currencies that could be used to purchase the domestic currency in exchange markets, as required to take care of its rate of exchange. However the international supply of 2 key assets i.e. gold and

| | |6. Explain how governments intervene in foreign exchange market and affect exchange rates. |

The international financial system is a structure of markets within which organizations and individuals trade to support economic commitments made across national borders where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade. The international financial market expands rapidly including money and derivatives since early 1980s. The increased integration of financial systems has involved

Currency Arbitrage: is the instantaneous purchase and sale of a currency in different markets for profit. This type of currency exchange market is frequently used by experienced traders in foreign exchange markets, along with large investors. Using this type of exchange market maximizes oyur profits and allows you to evaluate three currencies at a time and brings the market into an equilibrium.

Opposite of a long position, as this involves taking a position that benefits from a currency’s decline in market price. When the base currency within the pair is eventually sold, then the position is assumed to be short.

There would be the same currency in two states. But strict control would be present there to control the smuggling of money from one

In all global transactions, it is necessary to convert one country 's currency into another, this is known as foreign exchange, sometimes abbreviated as forex. Consequently, international currency exchange rates are one of the most important determinants of a country 's relative level of economic health, playing a vital role in smoothing the adjustment of the real economy to terms of trade shocks and keeping inflation contained. For this reason, exchange rates are among the most watched, analysed and governmentally manipulated economic measures.

occurs whenever there is a change of national currency, the current form or forms of money is