Global Financial Stability Paper

Global Financial Stability Paper - Global Financial...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Global Financial Stability 1 Global Financial Stability Ezzy Ihekoronye FIN/366 April 28, 2011 William Rainwater
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Global Financial Stability 2 Foreign Exchange Rate Foreign exchange market involves the purchase and sale of national currencies. It exists because economies employ national currencies. The foreign exchange market plays an important role in the determination of the exchange rate. This is the price of one currency in terms of another and the major participants in the foreign exchange market are the banks, brokers’ customers, and Federal Reserve. An example of foreign exchange rate is the value of British pounds being expressed in U.S. dollars. The U.S dollar is considered the base currency or the fixed currency in the stock market. A currency foreign exchange rate is determined by many factors, including the macroeconomic, monetary, and trade policies of its own country and those of other nations. Foreign exchange rate plays a crucial role for investors and the international Monetary Fund or IMF initially established a system of fixed exchange rates for the currency of all member countries as a part of Bretton Wood Agreement. The participants in the foreign exchange rate market trade for variety reason including short-term profits as well as protecting themselves from loss due to changes in exchange rates. Participating in the foreign exchange rate market allows the participants to acquire the foreign currency necessary to buy goods and services from other countries. Foreign exchange rates to The U.S Bank employs technique or otherwise known as hedging to help limit exposure to changes in foreign exchange rates. The total assets of the foreign branches of U.S banks continue to rise at much faster rate than the total asset of the domestic offices. Foreign exchange rates have played a major impact on the economy. When the currency of the U.S or any country weakens, the purchasing power reduces therefore imports suffer, while exports increases. A stronger currency would always translate to reduced exports and increase in imports. Businesses
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/26/2011 for the course FIN 366 taught by Professor Rainwater during the Spring '11 term at University of Phoenix.

Page1 / 6

Global Financial Stability Paper - Global Financial...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online