Currencies_and_Exchange_Rates

Currencies_and_Excha - Factors Inuencing Currency Value Currencies and Exchange Rates Part I Economic Factors 1 Balance of Payments 2 Interest

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Currencies and Exchange Rates: Part I Factors Infuencing Currency Value Economic Factors 1. Balance o± Payments 2. Interest Rates 3. Infation 4. Monetary and Fiscal Policy 5. International Competitiveness 6. Monetary Reserves 7. Government Controls and Incentives 8. Importance o± Currency in World Political Factors 9. Political Party and Leader Philosophies 10. Proximity o± Elections or Change in Leadership Expectation Factors 11. Expectations 12. Forward Exchange Market Prices The foreign exchange (forex) market - It is almost a 24/7 market (except weekends and bank holidays) - USD $6 trillion worth of exchange daily for: - Trade - Investments - Speculation - Risk management - Tourism - The market is connected by high-speed computers; it’s actually more like one virtual market. - London was dominant because: - History (capital of the Frst major industrialized nation) - Geography (between Tokyo/Singapore and New York) - Now some shifts noticeable to Asia, speciFcally Hong Kong. 1 USD = xJPY
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1 EUR = xUSD Exchange rates - Spot “the current” relationship between two currencies: - Example: I EUR = USD 1.40 - Settlement for “spot” deals: - 2 business days for most currencies - 1 business day for USD with Canada or Mexico - Forward rate “the current” relationship between two currencies +/- premium for a future trade date - Delivery for “forward” deals:
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This note was uploaded on 12/11/2011 for the course INTBUS 200 taught by Professor Tuli during the Fall '11 term at Wisconsin.

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Currencies_and_Excha - Factors Inuencing Currency Value Currencies and Exchange Rates Part I Economic Factors 1 Balance of Payments 2 Interest

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