Sav whether the stated currency has appreciated or depreciated.Ex rate at t=1 Ex rate at t=2$1.09CurrencySwiss Franc$1.12USD/SwissUSD/SwissFrancFranc125 yen/euro130 yen/euroEuro18 peso/CAD21 peso/CADPeso7 RMB/USD6.5 RMB/USDRMB

Currency appreciation and depreciation: Foreign exchange rates are quoted for currency pairs like…

. Sav whether the stated currency has appreciated or depreciated. Ex rate at t=1 Ex rate at t=2 Currency Swiss Franc $1.09 $1.12 USD/Swiss USD/Swiss Franc Franc 125 yen/euro 130 yen/euro Euro 18 peso/CAD 21 peso/CAD Peso 7 RMB/USD 6.5 RMB/USD RMB

. Sav whether the stated currency has appreciated or depreciated. Ex rate at t=1 Ex rate at t=2 Currency Swiss Franc $1.09 $1.12 USD/Swiss USD/Swiss Franc Franc 125 yen/euro 130 yen/euro Euro 18 peso/CAD 21 peso/CAD Peso 7 RMB/USD 6.5 RMB/USD RMB

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 1BIC

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Concept explainers

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.

Question

Sav whether the stated currency has appreciated or depreciated.
Ex rate at t=1 Ex rate at t=2
$1.09
Currency
Swiss Franc
$1.12
USD/Swiss
USD/Swiss
Franc
Franc
125 yen/euro
130 yen/euro
Euro
18 peso/CAD
21 peso/CAD
Peso
7 RMB/USD
6.5 RMB/USD
RMB

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DISCUSSION QUESTIONS Recreate Table 17.1 for the following currencies: Australian dollar, British pound, Canadian dollar, Chinese yuan, Euro, Japanese yen, and Swiss franc. Be sure to show both the direct quotations and indirect quotations. TABLE 17.1 Sample Exchange Rates: Friday, May 29, 2015 Direct Quotation: U.S. Dollars Required to Buy One Unit of Foreign Currency (1) Indirect Quotation: Number of Units of Foreign Currency per U.S. Dollar (2) Australian dollar 0.7644 1.3082 Brazilian real 0.3145 3.1793 British pound 1.5290 0.6540 Canadian dollar 0.8030 1.2454 Chinese yuan 0.1613 6.2004 Danish krone 0.1473 6.788 EMU euro 1.0993 0.9097 Hungarian forint 0.00355404 281.37 Israeli shekel 0.2586 3.8673 Japanese yen 0.00806 124.14 Mexican peso 0.0650 15.3776 South African rand 0.0823 12.1557 Swedish krona 0.1174 8.5195 Swiss franc 1.0636 0.9402 Venezuelan bolivar fuerte 0.1587289 6.3001 Nate: Column 2 equals 1.0 divided by column 1. However, rounding differences do occur. Source: Adapted from The Wall Street Journal (online.wsj.com). June 1, 2015.
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