econ_356_summary

econ_356_summary - Chapter 19 The Foreign Exchange Market...

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Chapter 19: The Foreign Exchange Market - The Exchange Rate: The price of one currency in terms of another. - The Foreign Exchange Market: The financial market where exchange rates are determined. - Exchange rates are important affect our economy imports and exports. - As our currency become cheaper domestic goods cheaper and imported goods expensive. - As our currency become higher domestic goods expensive and imported goods cheaper. - Exchange rates are highly volatile:   Euros to 1 USD   Source: http://www.x-rates.com/d/EUR/USD/graph120.html Graph (1) 1
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U.S. Dollar to Kuwaiti Dinar Exchange Rate Range: 1d 5d 3m 1y 2y 5y Invert Currencies Graph (2)   Japanese Yens to 1 USD  ( invert , data ) 2
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Source: http://www.x-rates.com/d/JPY/USD/graph120.html Graph (3) - What factors explain the rise and fall of exchange rates? - Why exchange rates fluctuate from day to day? - Foreign Exchange Market: Trade between countries involves an exchange of different currencies and bank deposits denominated in US dollars In this market, exchange rates are determined cost of foreign goods and financial assets are set. (over-the-counter market) - Two kinds of exchange rate transactions: 1. Spot transactions: immediate (2-day) exchange of bank deposits. (Spot exchange rate) 2. Forward transactions: the exchange of bank deposits at some specified future date. (Forward exchange rate)
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This note was uploaded on 11/29/2010 for the course ECON 356 at UBC.

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econ_356_summary - Chapter 19 The Foreign Exchange Market...

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