Global Business Foreign Exchange Notes

Global Business Foreign Exchange Notes - Foreign Exchange...

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Foreign Exchange - Exchange rate is the rate at which one currency is converted into another currency - Price determined by supply and demand for a currency - Factors: Example: high inflation in a country Excess supply- price goes down - A boost in interest rates Increase demand in the dollar Higher return of the dollar (more valuable) - People buying a lot more of a country’s product Prices will go up (of country currency) - People in a country buying a lot more of some other country’s products Less demand for dollar- price (value) of the dollar will go down
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Unformatted text preview: -Spot exchange rate- rate at which a foreign exchange dealer converts one currency into another currency on a particular day Price of a currency in a given day Changes continually depending on the supply and demand for that currency and other currencies-Forward exchange rate: the rate at which 2 parties agree to convert one currency into another on a particular day in the future 650k EUR= 963.95 USD Later $1M= 1.2511 M AUD .650K EUR * 1.483= 963.95 K USD [$36.05K left]...
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