Conversion of Rupees

On April 1, 1991, Argentina’s Congress, with Domingo Cavallo as Minister of Economy, enacted the Convertibility Law (or Ley de Convertibilidad) legally adopting the currency board (Hornbeck, 2002). This legislation essentially pegged the Argentinean peso to the U.S. dollar. The government guaranteed the convertibility of the peso to U.S. dollar at a one-to-one exchange rate, limiting the printing of pesos to only those necessary to purchase dollars in the foreign exchange market. Thus, the central bank was required by law to hold foreign reserves to cover its peso liabilities (Hanke and Schuler, 2002). With this fixed exchange rate, the Argentinean government was hoping to preserve the value of their currency and stabilize inflation. The peg was initially successful, as it cured hyperinflation that occurred at the end of the 1980s and provided price stability needed for economic growth in the early 1990s. However, by the late 1990s,

The currency of India has been falling much recently against the dollar, as the risk adverse global investors start getting worried about the deficits, as efforts are being made by the central bank to stem the slide of the currency. According to Fact Set data, the rupee hit 54.44 against the dollar, in December, 2011. According to the analyst, it is expected that the rupee may continue to weaken further, as Eurozone jitters dovetail with the raising worries on the slow growth rate, fiscal deficits and the current account.

Boral Group has been exposed to changes in interest rate, foreign exchange rates and commodity prices from its activities. Transactions in foreign currencies must be translated at the foreign exchange rate ruling at the date of the transaction. (Boral Limited, 2010) According to the notes of Boral Limited, the sensitivity analysis is used in adjusting the interest rate and currency risks in order to prevent the changes arising from changes of the interest rate and the currency rate from making an impact on the consolidated earnings. For example, at 30

- In 1983, Hawke floated the Australian dollar so its value was set on the world exchange rate.

In 2008 the central bank licensed certain sellers to set prices in foreign currencies. It was favorable for the sellers because they bought products abroad in foreign currency. This practice was used not only by the sellers with the permission but it was widely adopted.

Canada is using flexible exchange system after 1920 (Canada’s economy, 2011). Even though Canada financial system is in flexible exchange system, Canadian Dollar is still one of the strongest and creditable currencies in the world because of its careful global investment policies and vigorous banking system. As Canada is an open economic market, the value of its currency will be determined by its and world economy. Recently, Canada becomes one of the highest growths in its GDP in OECD. The Reason Canada with a strong economic is its sound banking and monetary guidelines, conservative financial framework and openness for trade. In fact, Canada has become one of the highest percentages of

The U.S. dollar became an international currency post the World War II and importance of the U.S. dollar was clearly seen in Australia. The percentage of the reserves of Australian foreign currency showed a decrease from 90% in 1950 to 45% in 1968. The foreign exchange transactions of the banks in the U.S. were dominated by the U.S. dollar and increased from 22% in 1963 to 33% in 1968. (Manuell, Guy.1986)

When buying or selling foreign currency, a corporation can either do it as and when it needs to, at the prevailing exchange rate, or try to transact when the currency exchange rate is at an advantage. A remarkably simple form of currency hedging is exchanging the currency in parts. If the corporation is uncertain if the

Exchange rates also impact on the current account balance. A depreciation in the exchange rate

Prior to 1970, fixed, or say pegged exchange rate regime was adopted by almost all countries worldwide. Afterwards, some countries have gradually made the transition from fixed to flexible exchange rates, which allow currency to float

Items presented in the financial statements of each of the Group`s entities are measured using the functional currency. IPL’s presentation currency is the Australian dollar, the currency used to present its consolidated financial statements. Foreign currency transactions are translated into the functional currency at the exchange rate on the day the transaction occurs. Foreign exchange gains and losses are recognised in the statement of comprehensive income, except when they are `deferred in equity as qualifying cash flow hedges`. These have been calculated following the AASB 121 `The effects of changes in Foreign exchange rates` and AASB 139 `Financial instruments – recognition and measurement`.

One of the greatest example when a country moved towards managed exchange rate regime is France after World War I. France had the stable currency, Franc since 1803 but during the war there was huge emission of notes due to which the price level shoot up. In 1924, the country was nearing defaults when the government intervened and took many measures to stabilize the currency. It cut down expenditures, increased taxes, increased capital inflows. A new ceiling was introduced on money in circulation which resulted in ceasing of treasury bonds. All of these measures led to accumulation of foreign reserves and thus the value of Franc increased in the world market and the currency reached to 80% of its pre war

First, the fixed nominal exchange rate has lost its real economic significance, the current RMB exchange rate formation mechanism is difficult to form market-clearing equilibrium rate. Practice, exchange settlement and capital management system in suppressing demand for foreign exchange at the same time creating a large part of foreign exchange supply, the central bank continued to intervene and the fact that the position of the largest market makers, erase all the differences between actual supply and demand. The central bank 's benchmark rate to determine the true market supply and demand balance is not the result can not reflect the market changes.

dollar. In dollarization, the country abolishes its own currency and uses a foreign currency, such as the U.S. dollar, for all domestic transactions. 6. Emerging market exchange rate regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations? There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 2.5, there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument, a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would prefer dollarization over a floating-rate peso. Clearly, there are many in the emerging markets of the world who have little faith in their leadership and institutions to implement an effective exchange rate policy.

There has been a long standing controversy among the economist about the validity of PPP (Purchasing Power Parity) in the long run. The parity reveals that prices in two different economies should be identical to each other when they expressed in terms of the same currency. It is a central building block in the monetary models of exchange rate determination. One of the most common practices, to test the validity of PPP is through unit root test of real exchange rate. In this paper unit root test has been done based on the data on Bangladesh and its major trading partner India, to see whether exchange rate has unit root or not. It has been found out that the PPP holds i.e. real exchange is not trend stationary in the