Financing and Exchange Rate Mechanisms

Financing and Exchange Rate Mechanisms - Running head:...

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Running head: FINANCING AND EXCHANGE RATE MECHANISMS 1 Financing and Exchange Rate Mechanisms Robert Miley University of Phoenix Global Business Strategies MGT 448 Jared Casper April 25, 2011
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FINANCING AND EXCHANGE RATE MECHANISMS 2 Financing and Exchange Rate Mechanisms In the following I will be talking about Global Financing and Exchange Rate Mechanisms. The topic I will choose to talk about is hard and soft currencies. First I will define what hard and soft currencies are. Lastly I will explain hard and soft currency is used in global financing operations and describe its importance in managing risks. Hard Currency Hard currency mainly is from the more industry producing counties and is accepted around the world as a form of payment for services and goods. Most hard currency is expected to be mostly stable in a short period of time, and to be extremely liquid in the Forex marketplace. Another necessity for a hard currency is that it must come from the more politically and economically viable countries. The U.S. dollar and the British pound are good examples of hard currencies (Investopedia, 2011). For the most part hard currency means that the currency is strong. Words like weak, strong, falling, rising, strengthening, weakening are regular terms in foreign exchange market place. Falling and Rising, strengthening and weakening point toward a change in position from a prior station. When the dollar is in a state of “strengthening” the value is gaining in contrast to one or more other currencies. The strong dollar will buy more units of a foreign currency than it would have done before. A good result of a stronger dollar is that the prices of foreign services and goods decline for U.S. consumers.
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