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Unformatted text preview: Chapter 6: Foreign Exchange Markets 6.1: Cur rency Markets and Exchange Rates Nominal exchange rate (e) - the price of one unit of a currency in terms of another currency o The trading process The interbank market large currency trades occur in this type of commercial bank (ex: jpmorgan chase) or investment bank (ex: deutsche bank) Minimum trade is $1 million worth of currency The retail market most companies and individuals who cant trade at the interbank market and go here if they want foreign currency and must use a broker. Small-scale currency markets- when you travel abroad, small offices in airports/ tourists spots where you can trade foreign currency with a dealer o Measuring exchange rates Changes in exchange rates Appreciation rise in a currencys price in terms of foreign currency Depreciation fall in a currencys price in terms of foreign currency Information on exchange rates 6.2: Why Exchange Rates Matter o Effects of appreciation Cheaper imports Lower sales for domestic firms...
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This note was uploaded on 07/10/2011 for the course ECON 2035 taught by Professor Stahl during the Summer '08 term at LSU.
- Summer '08