Prediction Of The Dollar And Euro

The exchange rates risk that is associated with economic, transaction, and translation exposure in Indian market. From the analysis, anticipate the fluctuations that seem to occur in the next 24 months

Another impact the euro could have on the American economy is by effecting the exchange rate of the dollar. Although there is great potential for the euro to have a positive impact on American business, there still is much uncertainty regarding the long-term effect it will have on the dollar's role as the world's dominant currency. Federal Reserve chairman Alan Greenspan in his remarks on the euro on November 30, 2001 states that, "clearly the

Foreign exchange rates are best described as simply the price of a country’s money expressed in another country’s money. In simple words, it is the rate at which a currency can be swapped for another. An example of determining foreign exchange rates is by substituting goods for currencies. Another example is the yuan-dollar exchange will depend on how well the demand and supply moves. When the demand for dollars in China climbs and supply does not go up correspondingly, each dollar will cost more yuan to buy. (Colander, 2010)

The model has its limitations as no exchange rate is expected not to change with time (Bernanke and Gertler, 1989). The third part is therefore unrealistic.

The mainly methodology in this project are Augmented Dickey-Fuller (ADF) Unit Root Test, ordinary least square regression (OLS) and Vector autoregression (VAR) model, which utilize in this paper to examine the relationships between the exchange rate and various economic fundamental variables. About econometric software, where it is used is Stata.

Globalization and liberalization have been promoting the integration of the global economy over the past decades. While the most significant change under this process is the increasing number of cross-border trades over the world, and it is obvious that exchange rates, as the quintessential international financial variable, plays a vital important role in the multinational transactions. For the last 25 years, worldwide economists have been studying the relationship between macroeconomic variables and exchange rates. One of the aims of the research is to make predictions based on the models (or links) they have found. However, many of them failed to uncover the link and tend to think that exchange rates movements may follow a random walk, but some of them still found some evidence that support the existence of such a link effective in the short-term and to a greater extent in the long-term. They, therefore, constructed their exchange rate determination models and made a calendar of expected macroeconomic announcements, and it has become a regular part of many financial Medias, such as The Economists and Financial Times. One of the most frequently discussed models is the flexible-price monetary model, and which is also the main discussion topic of this essay.

i) The exchange rate is the rate at which one can exchange the currency of one country for the currency of another country. It can also be regarded as the value of one country’s currency in relation to another currency. Basically, it is the price of a nation’s currency in terms of another currency. Therefore, the exchange rate has two components, the domestic currency and foreign currency, and it can be quoted directly or directly. In a direct quotation, the foreign currency is the base currency and the domestic currency is the counter currency. While in an indirect quotation, the domestic currency is the base currency and the domestic currency is the counter

Forecasting exchange rates while operating in Bangladesh is a crucial task for every MNC. Basically two prime objectives are available in this scenario which justifies the necessity of forecasting exchange rates for our US based MNC Georgia Power. These objectives are:

The Euro is the newly created currency of the European Economic Community, a currency that became legal tender on January 1, 1999. By 2002, euro notes and coins will replace the Austrian schilling, Belgian franc, Finnish markka, French franc, German mark, Irish punt, Italian lira, Luxembourg franc, Dutch guilder, Portuguese escudo, and Spanish peseta. These 11 nations will share a common currency, a single monetary policy, and a single foreign exchange rate policy. Currencies not only serve as a standardized value of measurement, so that we have a consistent way of expressing value, but they also function as an efficient means of payment. Also they serve as a store of value, allowing us to transport wealth easily over a distance and to store it for indefinite periods of time.

Exchange rate is the price of a nation’s currency in terms of another currency. Basically, it is the price of some foreign currency in terms of a home currency. Economist define the long-run as the period in which prices are flexible, and the short-run as the period in which prices are sticky. Therefore, the forces behind the exchange rate movements should be examined both in the long run and short run. Following a standard text-book description, I start with the long-run period.

In today’s global economy, accuracy in forecasting the foreign exchange rate or some predic- tions of its trend is very important for any future investment. Moreover, continuing volatility in currency values and increasing international transactions require to study and forecast cur- rency movement and exchange rates. Forecasting the exchange rate provides opportunities for exporters and importers to make better decisions considering costs and revenues from interna- tional operations.

Since many of us inhabit one area on a day to day basis, the relative price of goods and services appears fairly stable. Whether that’s the cup of coffee you pick up every morning or the paycheck you receive every two weeks, the value rarely ever changes. However, in reality, currency fluctuations occur every second and have various economic implications. The textbook case shows that an exchange rate shocks impacts inflation, interest rates and of course trade, just to name a few. Beyond directly influencing different economic channels, FX shocks have policy implications which are not as easily understandable. If exchange rates cause changes in import prices and domestic inflation, then subsequent monetary policies should be put in place. Following the work of various economic research, theory has rarely reflected reality when predicting exchange rates influence on domestic and international prices.

We have analyzed data for last 13 years, from 2000 to 2013.The paper covers theoretical aspects of exchange rate fluctuations and trade. Our study the theoretical evidences and is consistent with past available researches.

There are numerous factors that have been shown to influence and determine the real exchange rate, depending on the demand for a country’s currency. Among the most common influences are,

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.