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Unformatted text preview: ¥1 = $27,000 An appreciated currency means that imports are less expensive and domestically produced goods and exports are more expensive. An appreciated currency raises the price of exports relative to the price of imports. Foreign Exchange Markets Foreign The set of markets where foreign currencies and other assets are exchanged for domestic ones Institutions buy and sell deposits of currencies or other assets for investment purposes. The daily volume of foreign exchange transactions is $3.98 in 2009 compared to $1.9 trillion in 2004. About 90% of transactions involve US dollars. Trading in London accounts for around $1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0% Foreign Exchange Markets Foreign The participants: 1. 2. 3. 4. Commercial banks and other depository institutions: transactions involve buying/selling of deposits in different currencies for investment purposes. Non­bank financial institutions (mutual funds, hedge funds, securities firms, insurance companies, pension funds) may buy/sell foreign assets for investment. Non­financial businesses conduct foreign currency transactions to buy/sell goods, services and assets. Central banks: conduct official international reserves transactions. Foreign Exchange Markets (cont.) (cont.) Buying and selling...
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