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The currency exchange market is an inter-bank or inter-dealer market that was established in 1971 when floating exchange rates began to materialize. Trading is not centralized, as is the case with many stock markets (i.e. NYSE, ASE, CME) or as the case for currency futures and currency options, which trade on special exchanges. Dealers often "advertise" exchange rates using a distribution network, then use the information "agree" to a rate and a trade.
Considering trading volume, the currency exchange market is the worlds largest market, with daily trading volumes in excess of $1.5 trillion U.S. dollars, which makes it is by far the most liquid market in the world today. ecause of the volume in trading, it is impossible for individuals or companies to affect the exchange rates and even central banks and governments find it increasingly difficult to affect the exchange rates of the most liquid currencies,…
1. Lien K., Dyess P., and Rosen A., "Daily FX Weekly Market Reports" in June, July and August 2004, www.dailyfx.com
2.Currency Trading Overview - The Currency Exchange Market www. oanda.com
3.Weekly Market Commentary 30 July 2004 http://www.mizuho-cb.co.uk/
4. KBC Market Research Desk Sales Force Report 30 July 2004 www.kbc.be/research
When SALAM, an American company, makes its first foreign sale, a primary issue of concern is the currency exchange rate. Since SALAM is working on a very tight budget, losses can happen if the currency exchange rate changes during the three-month period between purchase and payment. Additionally, with concerns about the pound falling in the next three months, SALAM must make a decision quickly to ensure their profit margin is protected. SALAM has four possible options to avoid loss of profit. SALAM can either hedge in the forward market, hedge in the money market, hedge in the options market or choose to not hedge.
Remaining unhedged would mean that SALAM selected no further protection and simply waits for the three months to pass, accepting the exchange rate at the time of sale in three months. This option is always possible; however the company has intelligence suggesting that the…
Secondly, it could also be argued that United States and United Kingdom will not benefit in the long run due to the revaluation of the MB. This is due to the fact that the real effect of prices in the two countries will move the exchange rate to the previous equilibrium. But in the short run countries trading with china will benefit from the revaluation of MB. Other factors such as cheap labor and raw material prices also contribute to the cheap value of Chinese goods rather than only currency valuation. Even if the MB is revalued, and consequently China retaliates through tariffs on the import of goods than this would not benefit United States and United Kingdom, as tariffs would increase the prices of these goods in the Chinese markets. Another measure that the Chinese government could resort to in case of revaluation of MB is the provision of…
Corden, W 1994, 'Economic policy, exchange rates and the international system.' Oxford University Press, U.K.
Baumol, W & Blinder, A 2011, 'Macroeconomics: Principles and policy'. Cengage Learning, USA.
Madura, J 2009, 'International financial management'. Cengage, Learning.
strike Americans traveling or doing business in Israel is the exchange rate between the U.S. Dollar and the New Israeli Shekel. Of course, most are extremely happy when they leave the local exchange office or bank with a large wad of bills where they previously had but a few. This is because the current rate of exchange between the dollar and the shekel is 4.48 NIS per one dollar.
Unfortunately, this exchange does not necessarily mean that you can buy more in Israel. Take, for example that one wishes to purchase the latest souvenir t-shirt, say "I got stoned in Gaza." Now, of course it is normal to salivate over such a beauteous find. However, upon asking the price of this apparel gem, one's mouth may soon revert to its formerly parched state (completely normal in Middle-Eastern climes). Especially when the shopkeeper grandly announces that the item will cost you…
dual or alternative currency discussed in one or more readings, or one reading plus the film "Pig Tusks and Paper Money." How do the currency/currencies you discuss help to organize, express, or shape social life? How effective are they?
As an organization, the power of money is based on authority. The value and productive power of money depends directly on the perceived strength of the issuing government and the authority conceded to it by the population. This authority has an economic aspect, its capacity to maintain fiscal discipline, to collect taxes, to prevent counterfeiting. It also has a wider political and social aspect. The value of money issued depends on the perceived strength and stability of the government, the military strength and stability of the country and its relationship with other nations, and its capacity to enforce rule of law among its citizens. Authority and trust are complementary forces. Ultimately…
Maurer, B. (2012). Mobile Money: Communication, Consumption and Change in the Payments Space. The Journal of Development Studies, 589-604.
Narbet, C. (2013). The cowry shell as money. Retrieved from Conchsoc.org: http://www.conchsoc.org/pages/MW_6_p19-21a.pdf
(ichter, 2002, p. 126)
The Asian currency crisis put a heavy toll on the Asian economic paradigm sweeping across economies of Singapore, Taiwan and Korea. For instance, the implication of the regional crisis on Korea has been acute. It was compelled to approach the IMF for emergency credit and received $57 billion aid package with 7.5% of the Korean employable people without jobs by July 1998. Labor problems surfaced across the nation and the economy went limp by 5.3% during the initial half of the year. The Asian currency crisis caught everybody unaware particularly those who visualized Asia crafting for itself a new road to capitalist development. After all, the crisis put its highest impact in some of the economies which were earlier commended as part of the Asian economic miracle. This is especially true of Thailand, where the crisis struck for the first time. The then Prime Minister Chuan…
Bush, Sharon L. 2005. Asian Financial Crises-regional recapitulation or re-direction" Journal of Third World Studies. 17(2): 38-42.
Chowdhury, Bhagwan; Goyal, Amit. 2000. Understanding the financial crisis in Asia.
Pacific-Basin Finance Journal. 8(1):135-152
Das, Dilip K. 1999. Asian economic and financial crises: causes, ramifications and lessons.
Foreign Exchange Project
Euro Currency Analysis
Analysis is the toughest work of the world it needs ad hoc research and critical speculations. Analysis of a thing has a meaning of manifold. There are numerous kinds of analysis includes financial analysis, investment analysis, ethical analysis, character analysis, credit analysis and equity analysis. The idea presented in all of these analyses is somewhat some but the way of doing varies from analyst to analyst. It is a universal fact that the result of two analysts can be matched with each other because every analyst analyzes the things from different angles.
This particular analysis is all about the currency. The currency which has been for this particular piece of work is Euro currency which has been using in almost 90% of the European countries. Apart from that, we have to compare three countries which use Euro. The countries which have been compared in…
Benjamin, J & Cohen, B (1999), The Balance of Payments & Currency, McGraw Hill Publications
Gail, M & Makinen, M (1998), All About Euro Currency, Prentice Hall Publications
Mahr, J (2008), Five Years of the Euro, John Wiley & Sons Professional Publications
Serge, K & Guyne, K (2004), The Euro: A Currency of 300 Million People, McGraw Hill Publications
Chinese Currency Issues
Over the last several years, the issue of China's currency revaluation has been increasingly brought to the forefront. The reason why, is because many of the developed nations (i.e. The United States and the European Union) are experiencing unusually large trade deficits, while China is seeing trade surpluses. This is important, because issues such as currency disputes can have ripple effects on the world economy. Where, the actions taken by one major player can cause various imbalances to occur elsewhere. A good example of this can be seen with recent quantitative easing measures taken by the Federal Reserve. What happened was the as the stimulus has begun to wane over the last several months, many economists have begun to question if the world would experience a second (double dip) recession. This is where the economy will move into a stage of zero growth and will then begin…
"Paulson Promotes Letting Yuan Rise." Washington Times, 3 Dec. 2008. Web. 12 Nov. 2010.
"RMB Floating Could Be Risky." China Daily, 12 Nov. 2010. Web. 12 Nov. 2010.
"Tagging the Yuan as a Scapegoat is Unfair." China Daily, 24 Mar. 2010. Web. 12 Nov. 2010.
Braningan, Tania. "China Sells $34.2 Billion of U.S. Treasury Bonds." The Guardian. 17 Feb. 2010. Web. 12 Nov. 2010.
Foreign Currency Exchange Rates
Currency is fiat money -- it's a coin or bank note that has value because the government says it does and as such becomes legal tender -- one is required to accept it to fulfill a debt. hen the issue of currency leaves domestic grounds and becomes an issue of foreign exchange, things become really complicated. If a company wants to buy goods or services from someone else in a different country, they have to figure out how to pay for those goods or services. Since all currencies were not created equal this becomes a challenge and is the foundation of the most intricate market in the world -- the Foreign Exchange, where currencies are bought and sold based on continuously fluctuating values or exchange rates.
The exchange rates of currency make the world go round. Exchange rates affect the costs of imported and exported goods…
Currency. Wikipedia. Retrieved from http://en.wikipedia.org/wiki/Currency .
Groh, R. (2009). Best currency exchange rates [Web]. Retrieved from http://www.ehow.com/video_4765879_currency-exchange-rates.html.
Groh, R. (2009). What determines the foreign exchange rate? [Web]. Retrieved from http://www.ehow.com/video_4766767_what-determines-foreign-exchange-rate.html.
Groh, R. (2009). Who sets currency exchange rates? [Web]. Retrieved from http://www.ehow.com/video_4767575_sets-currency-exchange-rates_.html.
Foreign currency and macroeconomic analysis on the material currency against the U.S. dollar over the 5-year period ending with 2010.
Imagine studying what is going on with currency in the world today, especially with what is going on outside and within the United States. What will one discover through this research? Has the dollar improved or become worse over the years? By learning various coinage, one is able to grasp ways in which it is affecting the world today for the positive or negative.
In 2010, "the U.S. dollar hit a multi-decade high, with three-year volatility near its highest level in more than three decades" (Fidelity, 2011, para 1). This is quite significant because of how terrible the U.S. dollar is doing in comparison to foreign currency. In fact, other countries are doing better than us. A person cannot avoid this issue because of what is happening macro economically with…
Fidelity. (2011). The potential benefits of foreign currency exposure. Retrieved June 19, 2011, from Fidelity: https://guidance.fidelity.com/viewpoints/foreign-currency-exposure.
Sauder. (2009). Foreign currency units per 1 U.S. dollar, 1948-2009. Retrieved June 19, 2011, from Sauder: http://docs.google.com/viewer?a=v&q=cache:VMTdaC-jDSEJ:fx.sauder.ubc.ca/etc./USDpages.pdf+us+dollar+versus+foreign+currency&hl=en&gl=us&pid=bl&srcid=ADGEESg9pATNmbRkOvBM-WjSeajqQFmnFeI30wui2KlfP564hDM76NO58ovTjUd39JPghG82jooUxgt-JwtkfRtjzmL4rvE9nzvqr4mLzkH .
Solomon, A. (2011). Sterling Euro & U.S. dollar foreign currency forecast -- The Pound declined against the Euro. Retrieved June 19, 2011, from TorFX: http://www.torfx.com/blog/index.php/sterling-euro-us-dollar-foreign-currency-forecast-the-pound-declined-against-the-euro/10079 .
Forms of digital money have been on the rise in the past few years. Today, a broad assortment of transactions can be undertaken without using cash and conventional types of money. Cryptocurrency is the latest entrant. Since the emergence of Bitcoin in 2009, several other cryptocurrencies have been introduced, such as Ether, Litecoin, and Monero. Cryptocurrencies are digital assets intended to function as mediums of exchange. They are based on cryptography and blockchain technology. Though cryptocurrency could be the future of money, the inherent risks cannot be understated. Understanding the world of cryptocurrency is especially important given its connection to capital and money markets. For capital and money markets to function properly, mediums of exchange must be stable and reliable. This paper discusses the future of cryptocurrency. The paper specifically focuses on the implications of cryptocurrency on capital and money markets as well as the risks and concerns presented by…
Hackett, Robert. “7 cryptocurrency predictions from the experts.” Fortune, July 25, 2017, http://fortune.com/2017/07/25/bitcoin-ethereum-cryptocurrency-predictions/ . Accessed 19 August 2017.
Moore, Heidi. “The Mt Gox bitcoin scandal is the best thing to happen to bitcoin in years.´The Guardian, February 26, 2014, https://www.theguardian.com/money/us- money-blog/2014/feb/25/bitcoin-mt-gox-scandal-reputation-crime. Accessed 19 August 2017.
Stark, Harold. “From here to where? Bitcoin and the future of cryptocurrency.” Forbes, April 21, 2017, https://www.forbes.com/sites/haroldstark/2017/04/21/from-here-to-where- bitcoin-and-the-future-of-cryptocurrency/#671ec7644367. Accessed 19 August 2017.
Zhuravlyova, Sonia. The future of money: Bitcoin and other cryptocurrency technologies are a way of life in this small Swiss town. Newsweek, July 7, 2017, http://www.newsweek.com/2017/07/21/zug-switzerland-crypto-valley-bitcoin-digital- currency-634524.html. Accessed 19 August 2017.
Antweiler, W., the EUO - Europe's New Currency, the University of British Columbia, Sauder School of Business, 2001
http://fx.sauder.ubc.ca/euro/last accessed on July 21, 2008
Vatahov, I., Bulgaria's Prospects of Joining the Eurozone, the Sofia Echo, March 20, 2006
Waterfield, B., Bulgaria Threatens EU Treaty with Veto Over Euro, Telegraph
http://www.telegraph.co.uk/news/worldnews/1566069/Bulgaria-threatens-EU-treaty-veto-over-Euro.htmllast accessed on July 21, 2008
Bulgaria and the Euro, Official Website of the European Commission, 2008, http://ec.europa.eu/economy_finance/the_euro/your_country_euro8956_en.html. Ast accessed on July 21, 2008
Economic and Financial Affairs, Official Website of the European Commission, 2008, http://ec.europa.eu/economy_finance/the_euro/index_en.htm?cs_mid=2946last accessed on July 21, 2008
US Dollar to Euro Currency Exchange Forecast, the Financial Forecast Center, 2008, http://www.forecasts.org/euro.html. Ast accessed on July 21, 2008
Antweiler, W., the EUO - Europe's New Currency, the University of British Columbia, Sauder School of Business, 2001
Economic and Financial Affairs, Official Website of the European Commission, 2008
US Dollar to Euro Currency Exchange Forecast, the Financial Forecast Center,…
Antweiler, W., the EURO - Europe's New Currency, the University of British Columbia, Sauder School of Business, 2001
http://fx.sauder.ubc.ca/euro/last accessed on July 21, 2008
Vatahov, I., Bulgaria's Prospects of Joining the Eurozone, the Sofia Echo, March 20, 2006
Waterfield, B., Bulgaria Threatens EU Treaty with Veto Over Euro, Telegraph
The online encyclopedia of financial terms known as Investopedia puts it quite bluntly. A soft currency is simply another, a 'softer' or less pejorative name for a weak or unstable currency. "There is very little demand for this type of currency" amongst investors, because its values often fluctuate, making international businesses unwilling to invest in countries with soft currencies. ("Soft Currency," 2005) Soft currency nations make it difficult for companies to make money, because goods are sold in a currency with an unstable value, and local financing is difficult to obtain. Currencies from most developing countries are considered to be soft currencies. A soft currency is also called a vulnerable currency because tends to fall in value on foreign-exchange markets.
Often, countries such as Latin American nations with heavy debt, or the former Soviet Block countries are used as the paradigmatic examples of soft currency nations. Their currencies…
Hutchinson's Encyclopedia. (2005) "Soft Currency." Retrieved 12 Jan 2005 at http://www.tiscali.co.uk/reference/encyclopaedia/hutchinson/m0021839.html
Investopedia. (2005) "Hard Currency." Retrieved 12 Jan 2005 at http://www.investopedia.com/terms/s/softcurrency.asp http://www.investopedia.com/terms/h/hardcurrency.asp
Investopedia. (2005) "Soft Currency." Retrieved 12 Jan 2005 at
reserve currencies, with specific reference to how an asset manager should approach the issue of diversifying into multiple reserve currencies in order to achieve better stability in asset value.
hile the U.S. dollar and the euro are the world's two leading reserve currencies, two new currencies have been added by the IMF to the list of reserve currencies. These are the Canadian dollar and the Australian dollar, both being commodity-driven currencies whose stock has risen significantly in the past decade, in part because of the commodity market and in part because those two countries have robust banking sectors and therefore avoided the worst of the 2008 global recession (RT, 2013). This paper will examine the issue of reserve currencies. For a company doing business internationally, is there any merit to using secondary reserve currencies like the aforementioned CAD and AUD, or the Swiss franc, British pound or yen for that…
RT. (2013). IMF to add CAD and AUD as reserve currencies; which one's next? RT.com. Retrieved April 13, 2013 from http://rt.com/business/imf-reserve-currencies-909/
Frolova, M. (2013). Will the world get new reserve currency? The Voice of Russia. Retrieved April 13, 2013 from http://english.ruvr.ru/2013_01_18/Will-the-world-get-new-reserve-currency/
Chovanec, P. (2013). Is the Chinese renminbi the next global reserve currency? The Atlantic. Retrieved April 13, 2013 from http://www.theatlantic.com/china/archive/2013/03/is-the-chinese-renminbi-the-next-global-reserve-currency/274454/
Thus, the monetary policy of ECB cannot address the economic need of individual member states.
The British etailing Consortium estimates that British retailers would have to spend between 1.7 billion pound and 3.5 billion pound to train people to use Euro and make the appropriate transitions. But this appears feasible for the present 12 members of the Euro area.
Lawless, Andrew. "The Euro - an assessment of the Euro, and the Challenges facing the single
European Currency. Prof. ay Kinsella in interview with Three Monkeys Online." Three Monkeys Online. 2004. ThreeMonkeysOnline.com. 27 Apr. 2005 http://www.threemonkeysonline.com/threemon_article.php?id=3.
BBC News | Single currency | Pros and cons." BBC News. 1997. BBC News. 28 Apr. 2005 http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm.
Euro - Wikipedia, the free encyclopedia." Wikipedia, the free Encyclopedia. 2005. Wikipedia,
The free Encyclopedia. 27 Apr. 2005 http://en.wikipedia.org/wiki/Euro.
Europe's Single Currency, the Euro." Europe's Single Currency, the Euro. 2000.
Investinfinland.fi. 27 Apr. 2005 http://www.investinfinland.fi/business_environment/en_GB/business_environment/_files/11041868050000212/default/euro_eh.pdf.
Lawless, Andrew. "The Euro - an assessment of the Euro, and the Challenges facing the single
European Currency. Prof. Ray Kinsella in interview with Three Monkeys Online." Three Monkeys Online. 2004. ThreeMonkeysOnline.com. 27 Apr. 2005 http://www.threemonkeysonline.com/threemon_article.php?id=3 .
BBC News | Single currency | Pros and cons." BBC News. 1997. BBC News. 28 Apr. 2005 http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm .
Euro - Wikipedia, the free encyclopedia." Wikipedia, the free Encyclopedia. 2005. Wikipedia,
Resulting from the devaluation of China's currency was an exacerbation of problems throughout Asia.
VII. 1995-96 -MINI-RECESSION, DET PROLEM, ACCUMULATION
In the summer of 1995, the reversal of the chronic weakness of the dollar resulted in the depreciation of the Japanese yen, which had been approaching an acute deflationary crisis with a steep fall in the stock market. (Makin, 2000; paraphrased)
VIII. 1996-97 - DET / FOREIGN EXCHANGE, RESERVE RATIONS DETERIORATE
The work of Williamson (1999) entitled: "Implications of the East Asian Crisis for Debt Management" relate that a countries debt can be viewed from four different external perspectives in terms of debt composition which include: (1) FDI; (2) Portfolio Equity; (3) Long-term loans; and (4) short-term loans. This is the ideal composition of a countries debts however the debt profile of countries in East Asia are known to profoundly differ from the foregoing profile in that they had too…
Banking System Developments in the Four Asian Tigers (1997) Economic Research and Data. Federal Reserve Bank of San Francisco. 8 Aug 1997. Online FRBSF Economic Letter. Available at http://www.frbsf.org/econrsrch/wklyltr/el97-22.html
Barro, Robert J. (1998) the East Asian Tigers Have Plenty to Roar About. Economic Viewpoint Business Week 27 Apr 1998. Online available at http://www.economics.harvard.edu/faculty/barro/files/bw98_04_27.pdf
Hughes, Christopher W. (1999) Japanese Policy and the East Asian Currency Crisis: Abject Defeat or Quiet Victory. 1999 February Online available at http://www2.warwick.ac.uk/fac/soc/csgr/research/workingpapers/1999/wp2499.pdf
Hughes, Christopher W. (1999) Japanese Policy and the East Asian Currency Crisis: Abject Defeat or Quiet Victory. CSGR Working Paper No. 24/99. February 1999. Online available at
Nevertheless, the heavy reliance on such debt led in some cases to severe difficulties, as illustrated by the Mexican tequila crisis of late 1994 and the Brazilian crisis of 2001. In Mexico the problem happened when investors became increasingly reluctant to roll over their short-term peso-denominated cetes and instead shifted their funds to short-term dollar-indexed tesobonos. This shift to dollar-indexed liabilities supplied a temporary respite for the government but the short-term nature of outstanding securities also meant that the transformation in the structure of debt towards tesobonos was extremely quick. The rapid withdrawal of foreign investment from the domestic market at the end of 1994 and the resulting sharp drop in the Mexican peso resulted in an explosive growth in the peso value of dollar-indexed government liabilities, thereby adding a fiscal dimension to the external crisis (Jeanneau and Tovar, n.d.).
The local government bond market has expanded rapidly in Mexico…
Dalla, Ismail and Hesse, Heiko. (2009). Rapidly growing local-currency bond markets offer a viable alternative funding source for emerging-market issuers. Retrieved April 9, 2010,
from Vox Web site: http://www.voxeu.org/index.php?q=node/4081
Jeanneau, Serge and Tovar, Camilo E. (n.d.). Financial stability implications of local currency bond markets: an overview of the risks. Retrieved April 9, 2010, from Web site:
Euro before Brexit has maintained a higher value than the dollar since its creation. However, post-Brexit it depreciated slightly from 0.9109 and now stands at 0.88260 compared to the U.S. Dollar value of 1, meaning it appreciate in value within the time span of one month. The Australian Dollar has maintained a lower value than the U.S. Dollar. However, in the month of August it hit a dip of 1.29, appreciating in value. The same thing happened to the Canadian Dollar, which has always had lower value than the U.S. dollar but saw an increase in value going down to 1.28637 from 1.3212. The Japanese Yen took the same route appreciating in value from 106.55 to 100.18. The same as well for the Chine Yuan which started in July with 6.68 and now stands at 6.64879.
In regards to 4 years ago, the euro maintained a similar value at 0.82.…
China's currency policy may make that country the main country with whom the U.S. has a current account deficit, but if not for China the U.S. would have the same problems, just with another country for the protectionists to scapegoat.
3) I think an aggressive legislative posture is the best approach to take with regards to China's currency position. Ultimately, China is an economic actor the same as any other. They are going to do what they feel is best for their country (Wolf, 2006). Thus, in a situation like this where their currency policy is viewed to be doing harm to the U.S. economy, the best approach to make them reconsider such policy is to alter the economics of that policy. Thus, tariffs, sanctions and anti-dumping fines are the most effective means.
In the specific case of China, the notion that a WTO ruling is going to change their…
Martin Wolf, "How China has Managed to keep the Renminbi Pinned Down," Financial Times, October 11, 2006, p.13
Sue Kirchhoff, "First step: China Will Stop Pegging Yuan to Dollar," USA Today, July 22, 2005, pp. 1B, 2B
Keith Bradsher, " a Chinese Revaluation May Not Help U.S.," the New York Times, January 4, 2005, pp. C1, C5
Ronald McKinnon, "The International Dollar Standard and Sustainability of the U.S. Current Account Deficit," Stanford University, March 29/30, 2001, retrieved online June 11, 2008 at http://www-econ.stanford.edu/faculty/workp/swp01013.pdf
In demonstration, Gross notes the anecdote of a drug mule traveling from pain to Colombia, in whose stomach officials found $197,000 in euro notes (Gross 2007).
While the underground economy serves as an indicator of stability and value for the currency market, this stability and value are influenced by a confluence of further economic factors in addition to the ones already mentioned above. Chinn & Frankel (2005:15) focus on four specific factors that influence the future probability of euro dominance over the dollar.
The first of these is patterns of output and trade. This relates to the already-mentioned amount of market presence of a certain currency. Currently, the U.. dollar enjoys the greatest presence in the world economy. Interestingly, the authors hold that, if output and trade are regarded as measures of a country's economy, Japan should be the second in the world. However, other factors such as economic size…
Chinn, Menzie & Frankel. 2005. Will the Euro eventually surpass the Dollar as leading international reserve currency? National Bureau of Economic Research, July. http://www.nber.org/papers/w11510.pdf
Galati, Gabriele & Wooldridge, Philip. 2006. The Euro as Reserve Currency: A challenge to the pre-eminence of the U.S. Dollar? Bank for International Settlements: Monetary and Economic Dept., October. http://www.bis.org/publ/work218.pdf?noframes=1
Gross, Daniel. 2004. Euro Trash: Even drug dealers are giving up on the dollar. Slate Magazine, Dec. 28. http://www.slate.com/id/2111504/
Nielsen, Bo. 2007. Dollar may extend rally on Bets U.S. To contain subprime losses. Bloomberg.com, Dec. 18. http://www.bloomberg.com/apps/news?pid=20601101&sid=aFeKleEvhHtI&refer=japan
Thus, a region or nation experiencing economic depression will be unable to use the interest rate lever to boost the economy. Similarly a country with high inflation will be unable to independently raise interest rates to contain inflation. Moreover, Islamic countries, which form a large part of the geography, do not believe in interest rates.
Political barriers -- Political differences between nations make it extremely difficult for them to adopt a common currency. It can lead to a loss in political sovereignty as monetary interests would need to surpass political interests. This is unlikely to be acceptable to most of the nations and the idea of a single currency may be difficult to implement (Gimp, 2008).
Will Pros and Cons change Over Time? Depending On the Country?
The economic conditions to determine a monetary union depend on: the openness and size of the economy involved to trade; the free movements…
BBC. (1997, November 21). European monetary union - pros and cons. Retrieved May 11, 2009, from BBC News: http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm
Filho, F.F. (2003). Is it possible to achieve a monetary union in MERCOSUR? (South America). Retrieved May 11, 2009, from Vanderbilt University: http://sitemason.vanderbilt.edu/files/egnZLy/Ferrari%20Filho%202.pdf
Frankel, J. (1999, August). No single currency regime is right for all countries or at all times. Retrieved May 11, 2009, from Princeton University: http://www.princeton.edu/~ies/IES_Essays/E215.pdf
Gimp, F. (2008, June 27). A world currency - pros and cons and can it become a reality. Retrieved May 11, 2009, from Piponomics: http://www.babypips.com/blogs/piponomics/a_world_currency_pros_and_cons.html
Online Transaction Empowered by E-Currency Exchange without credit card
The growth of the internet on a public scale, since its arrival in the eighties has allowed businesses to expand internationally. User interactions are no longer restricted to the local level. Easy to use web interfaces allow voice, message and video-based conversations. Entrepreneurship is much easier than before as individuals can place their product catalogues on websites without much set up costs. Country specific currencies (such as the American dollar, Euro, upee etc.) tend to cause problems if users need to purchase something unavailable in their location. This led to the concept of 'E-Currency' which is geared towards online transactions as it removes usage limitations based on country or nationality. The popularity of this industry grew as a way of handling the restrictions imposed on global businesses. Privacy is a major concern in this regard since there are multiple web-based transactions…
Christian, P.(n.d.) Speed-E-Money: A subsidiary of international load center. Retrieved from http://www.speed-emoney.com
n.a. (2002) Understanding the E-Currency and Exchange maker industries. Retrieved from www.financial-spread-betting.com/e-gold.pdf
n.a. (2011) Terms of service. Retrieved from http://www.e-currencybank.com/nview/title/Terms+of+services/?lang=english
n.a.(2011) E-Currency Fact Sheet. Retrieved from http://www.adl.org/internet/e_currency.asp
Cross-Country Capital Flows and Currency
overseas investment .
GLOBAL INSTITUTES IN INTERNATIONAL FINANCE .
INTERNATIONAL FINANCE CORPORATION .
ORLD BANK .
ORLD TRADE ORGANIZATION
INTERNATIONAL MONTARY FUND .
INTERNATIONAL FINANCE IN CHINA .
THE EXCHANGE RATE FIASCO
FINANCIAL CRISIS IMPACTS ON SINO-AMERICAN RELATIONSHIP
RECESSION'S AFFECT ON CHINA .
ASIAN MONETARY FUND .
CHINA'S TRADE POLICIES AND THEIR CONTRIBUTION TO THE FINANCIAL CRISIS
Monetary policy is the study of circulation of money, the granting of credit, the making of investments and the provision of banking facilities and international finance is studying it on an international level.[footnoteRef:2] Usually the affect can be seen in exchange rate and foreign investment and international trade. This includes the analysis of global financial markets, cross-country capital flows and currency, international projects, and overseas investments. [2: Merriam-ebster Online Dictionary: http://www.merriam-webster.com/]
US Monetary Policies have a far reaching effect on the other…
Alta villa, Carlo, and Matteo Ciccarelli. "The Effects of Monetary Policy on Unemployment Dynamics under Model Uncertainty: Evidence from the United States and the Euro Area." Journal of Money, Credit & Banking 41.7 (2009): 1265+. Questia. Web. 18 Mar. 2011.
Auerbach, Robert D. Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan's Bank. Austin, TX: University of Texas Press, 2008. Questia. Web. 18 Mar. 2011.
Barron, Jacob. "Jobs, Exports and the Yuan: Pressure Builds on China for Currency Reform." Business Credit May 2010: 30+. Questia. Web. 18 Mar. 2011.
Bi, Jianhai. "An Asian Monetary Fund? Jianhai Bi Outlines Asian Efforts to Protect Their Economies during the Global Financial Crisis and Predicts Long and Difficult Negotiations." New Zealand International Review 34.6 (2009): 8+. Questia. Web. 18 Mar. 2011.
Asian Economic Crisis
In the summer of 1997, an economic and currency crisis rocked the Asian markets. One by one, southeast Asian countries such as Thailand, Indonesia, Korea and Japan saw their economies crash in the wake of heavy foreign investment. An economic boom had made the region an attractive investment opportunity for much of the 1990s. y 1997, however, domestic production and development had stalled, and foreign investors grew nervous. A divestment run on the Thai baht triggered the crash. Large corporations, extremely dependent upon the confidence of foreign investors failed to meet debt obligations and began to fail throughout southeast Asia. Currencies throughout the region faltered and nosedived from their mid-1990s positions of stability. The causes of the Asian economic crisis are varied. Lax oversight of corporations had ramifications in economic downturns that were not a concern in the mid-90s boom. Macroeconomic policies of the southeast Asian countries…
Chronology of the Asian Currency Crisis.(n.d.). Retrieved July 1, 2004 from Web site: http://www.stern.nyu.edu/globalmacro/ AsiaChronology1.html
Corsetti, G., Peneti, P., & Roubini, N. (1998). What caused the Asian currency and Financial crisis? Part I: A macroeconomic overview. Downloaded June 26, 2004 from Stern School of Business, NYU, Web site:
macroeconomics, the U.S. Dollar appears to be the currency holding the greatest global power. Indeed, it is the dominant reserve currency (Liu), now comprising 68% of global reserves, while just a decade ago the dollar accounted for 51% of global currency reserves. ecause it is so globally prominent, even minor changes in the economy influences the power and performance of the dollar. It appears that recent market influences and fluctuations have in fact influenced the value of the currency negatively. elow such influences as imports, exports, markets and inflation are examined in terms of the American currency. It is interesting to note that some critics are somewhat gloomy regarding the future value of the dollar, as well as the American economy, while others see the recent decrease in dollar value as a positive trend.
Heinberg for example points towards the recent decline in the value of the dollar, and the…
Craven, Jill. "Dollar's fall boosts U.S. machinery exports." In Monthly Labor Review, July 1991. Bureau of Labor Statistics. Database: www.findarticles.com
Heinberg, Richard. "The Endangered U.S. Dollar." Museletter, Issue no. 149, August 2004. http://www.museletter.com/archive/149.html
Liu, Henry C.K. "U.S. dollar hegemony has got to go." Asia Times (atimes.com). http://www.atimes.com/global-econ/DD11Dj01.html
he currency in South Africa is the rand. he rand is a free floating currency meaning that there are few controls on the value of the currency. While the rand is a reference currency in the southern Africa region, it is not considered to be a "hard" currency. he performance of the rand against the USD in the past year is as follows:
he chart shows the downward trajectory of the rand against the dollar. A year ago, the rand traded at 7.73 to the dollar, and today it is 9.12, a decline of 18%. his bodes well for a manufacturing operation in South Africa, where the already-low labor costs would be decreasing over time. It does not bode well for selling in South Africa, however, as the country's currency continues to get weaker, which means profits from South Africa will be worth less in dollar…
The Chinese yuan is not a floating currency. Its exchange rate is managed heavily by the Chinese government and as a result trades within a band set by the Chinese government, on a soft peg to the U.S. dollar. China's currency manipulation may perpetuate the band, but the country is under severe inflationary pressure. This puts the yuan on a steady, long-run appreciation, which can be seen in its chart for the past year:
The yuan one year ago traded at 6.29 to the dollar and today it trades at 6.23. This represents an appreciation of 0.9%. The country face high inflation for much of the year, but that inflation is reported to have dropped to 2.1% in March 2013. This inflation rate is not much different than that of the U.S., which would imply that the exchange rate should remain fairly stable. However, the overriding factor is China's currency band, which is likely to be maintained for the foreseeable future. As a result, the yuan will appreciate in the next year, but only by around the same amount as last year, so that the rate will be around 6.17 yuan to the dollar.
Overall, China represents the best option for Dorchester for selling it televisions. This is almost by default. South Africa is facing a weakening rand amid economic uncertainty. The country still has potential, but the timing is wrong given that the macroeconomic conditions are tough and the rand is depreciating faster than the inflation rate. The situation in Japan is worse. The economy might be better, but the yen is depreciating and there is deflation in the economy. This is bad news all round, and earning yen right now it not wise. This leaves China. China has its own problems -- growth is slowing and currency controls mean that there is a difference between earning yuan and being able to return those earnings to the United States. However, the slow appreciation of the yuan and some overtures to convertibility highlight the reality that China is a fairly safe country in which to invest, in terms of currency exchange rate expectations.
prospective members of the European Union pecified by the Nice conference, Poland bears the distinction of both having the largest population at 38.6 million, and the largest GDP at 176 billion. From 1997 through 2001, the Polish economy has grown at a steady 4.1% a year and is in many ways beginning to resemble its new western partners rather than its still-troubled eastern neighbors. (Economist, Jul. 29, 2002) Despite this, Poland differs from the traditional continental powers in several distinct ways. Perhaps most unique is the Republic's relationship with the United tates.
It may surprise those that know little of Polish history that the republic owes its existence to the United tates. In 1918, the country was re-established by the treaty of Versailles after 123 years of Prussian and Russian control of the region. This was achieved primarily in light of the lobbying activities of the Polish emigre population living…
Poland: Factsheet. Economist, Jul. 29, 2002
Poland: Economic Structure. Economist, Nov 19th 2001
Warm Feelings Toward the United States in Central Europe. Economist, Jan. 30, 2003.
Europe's Mexico Option. Economist, Oct 3, 2002.
Crypto is a term that is an abbreviation for cryptography. In accordance to Vacca (2010), the word cryptography emanates from two words crypto and the Greek term graphikos. The former means a secret that is hidden or concealed while the latter means for writing. The two words when joined together mean a concealing place for notions, words, images and sounds. A cryptocurrency is form of exchange similar to normal currencies for example Euros, Dollars, and Pounds but are created purposefully for exchanging digital data and information through a procedure that is made conceivable by means of particular ideologies of cryptography. In essence, cryptography is employed in safeguarding the transactions and to regulate the generation of new coins. The original or the initial cryptocurrency that was formed and generated is Bitcoin which was unveiled in the year 2009. In the present day, there are numerous other cryptocurrencies which…
Vacca, J.R. (2010). Network and System Security. United Kingdom: Elsevier.
Cuthbertson, A. (2014). Darkcoin: The 'Perfect E-Cash' Cryptocurrency Emerging from the Dark Web to Trump Bitcoin, International Business Times. Retrieved from: http://www.ibtimes.co.uk/darkcoin-perfect-e-cash-cryptocurrency-emerging-dark-web-trump-bitcoin-1472144
Higgins, S. (2014). How True Anonymity Made Darkcoin King of the Altcoins, CoinDesk. Retrieved from: http://www.coindesk.com/true-anonymity-darkcoin-king-altcoins/
Tonewsto, A. (2014). Time for Islamic Law to Face the Bitcoin Question, ToNewsTo. Retrieved from: http://www.tonewsto.com/2014/10/time-for-islamic-law-to-face-bitcoin.html
This means those companies that are in industries that are exposed to tremendous amounts of volatility should be engaging in these activities. Some of the different areas they will become involved in are: currencies, stocks, futures, options and commodities. The reason why, is because these kinds of companies are often exposed to large swings that could happen at any point in time (due to adverse changes in the economy or the markets). This will have a negative effect on earnings and it will become difficult from them to make accurate projections. When a company begins using hedging, this will provide more consistent earnings stability to their business model. This is point that they can provide more stable returns to shareholders.
However, not all firms should be hedging. In some cases, this activity could be considered to be speculation. As, the hedge may not provide any kind significant benefit to the…
Thomas, M, 2005, Hedging Instruments and Risks. McGraw Hill, New York.
The U.S. trade deficit and downward pressure on wages in many industries is more a factor of the Chinese manufacturing sector being more aggressive in lean manufacturing and efficiency practices (Taj, 2008) than any other factor. To demonize China is to miss the point of what it means to be in a market-driven global economy. Only after nearly going bankrupt and needing huge federal assistance programs are American automakers finally building small cars. Like a drug they were addicted to, American auto manufacturers could forever build larger cars and trucks, even originating Sport utility Vehicles (SUVs) as a category, and never pay attention to fuel economy or cost of ownership. With GM nearly bankrupt it looks as if their SUV addiction is finally being broken. But it took a full-scale intervention, the magnitude the U.S. has not seen since the Great Depression, to wake these companies up and make them…
David D. Hale and Lyric Hughes Hale. (2008). Reconsidering Revaluation; the Wrong Approach to the U.S.-Chinese Trade Imbalance. Foreign Affairs, 87(1), 57-66.
Hu, J., Su, Y., & Chen, C. (2008). Efficiency of Nationwide Banks in China. Journal of American Academy of Business, Cambridge, 13(2), 84-90.
Lo, C.. (2007). China's Yuan Decision. The International Economy, 21(4), 78-81.
Shahram Taj. (2008). Lean manufacturing performance in China: assessment of 65 manufacturing plants. Journal of Manufacturing Technology Management, 19(2), 217-234.
S. dollar is still weak (Triplett, 2003). This study will seek to determine how the weakening U.S. dollar will affect European markets and competitiveness with China, a main exporter to Western Europe at this time.
The conditions within the steel market in particular have been reported as declining for several years, but there is some evidence which suggests a change is occurring within the industry (Triplett, 2003). There is some evidence which suggests that domestic distributors might actually benefit from the weakening of the U.S. dollar, in fact it might enable further economic recovery (Triplett, 2003).
This study will seek to determine whether or not theses statements are valid, in order to determine the best possible avenue Europeans can take to remain competitive and U.S. manufacturers can take to help facilitate a more productive economy.
The researcher intends to conduct a qualitative study of the literature currently available with…
Alhonen, M. (2003). "Teknologicateollisuus." Technology Industries of Finland.
Retrieved March 4, 2005: http://www.teknologiateollisuus.fi/english/index.php?m=8&s=1&news_id=8
"Hydro Aluminium." (2004). Retrieved March 5, 2005: http://www.hydro.com/en/investor_relations/financial_rep/2004_q4/aluminium.html
Triplet, T. (2004). "Overcapacity, Imports put a strain on stainless." July, 2003. Retrieved March 6, 2005: http://www.metalcenternews.com/2003/July/mcn0307f2Stainless.htm
Negative Effect of the Euro
The major issue facing the euro as a single currency is the potential problems that EU nations may face in absorbing future economic shocks. This is largely due to the fact that unlike most monetary unions, the euro will not be governed by a central fiscal policy since most member states are reluctant to give up control of taxation and expenditure policies. To compensate, euro countries are bound to observe fiscal guidelines laid down by the Maastricht Treaty of 1992 and the Stability and Growth Pact drawn up in 1997.
The Maastricht Treaty defined criteria that entails annual budget deficits held to 3% of GDP and the gross debt-to-GDP ratio reduced to 60% in order to avoid excessive borrowing by member states. Subsequently the Stability and Growth Pact defined the penalty sanctions to be imposed on defaulting nations. The EU believed that these measures would…
Atkinson, Mark. "Rate rises in Europe weaken euro." The Guardian. October 6, 2000. Guardian Unlimited Web site. URL:
Dailey, Chris. "Fiscal Policy in the Eurozone." University of Dublin Web site. URL:
Concluding Statement of the IMF Mission on the Economic Policies of the Euro Area." June 27, 2001. International Monetary Fund Web site. URL:
Paper Money vs. Electronic Money
I would define money as a form of currency that represents a store of labor or value (Davies, 2004), which can be exchanged for goods or services. Money does not have to be “backed” by anything—though some feel it should be backed by a standard such as gold, which is universally acknowledged as having value (Kemp, 2001). In actuality, one’s government has a natural right to coin its own currency and issue it to citizens. The fact that our government has given up this right to the central bank, from which it borrows money at interest signals that the true government of our nation is the central bank, since it possesses the authority formerly held by kings.
Extending from that fact is the idea that the “notes” we are issued from the bank have value—but the paper money (fiat, as it is called because the…
In summary, I feel that I have learned to use a credit card in a way that benefits me more than the merchant or the bank.
For other consumers increasing reliance on electronic payments may be a problem, especially for the newer and lesser understood debit cards. There appears to be certain classes of consumers that view a plastic card differently from actual cash or that purchase more because it's easier to do so. The rising credit card debt problem in the United States is already a frequently covered issue and debit cards may be the next item of discussion. Debit cards may make the consumer debt problem worse by extending electronic payment access to customers who don't qualify for credit cards. Unlike credit cards, debit cards require the cash to be available in an account, but it doesn't mean that this cash wasn't earmarked for other necessities. And, it…
Talcott, S. (2004, August 13). Cash loses currency. The Boston Globe. Retrieved February 10, 2005 from Web site: http://www.boston.com/business/articles/2004/08/13/cash_loses_currency
China announced on Oct. 28, 2004 the first interest rate rise in nine years. In this manner, Beijing is showing its willingness to adopt additional market-oriented reforms in order to have a tighter macro-economic control on the already overheated economy. Although the news regarding the evolution of the Chinese interest rate were contradictory, it would appear that North American economists are welcoming this interest rate increase.
The Chinese economy is rapidly becoming one of the most important in the world, with an annual 8% growth-rate, constant expansion in the preceding years and a history of twenty years of economic reforms. The global economy and especially neighboring countries such Taiwan and Hong Kong are feeling the pressure of the Chinese machine. Investors have made public their fears, since April 2004, that the economy will overheat and are now expecting the austerity measures by the Government to slow the growth and provide…
. "China economy: Beijing considers rate rise to cool economy";
EIU ViewsWire. New York: Apr 20, 2004. pg. n/a (c) 2004 The Economist Intelligence Unit Ltd.,Source: Financial Times
2. "Chinese interest rise shakes international market";
The English version of the Chinese People's Daily Online
Exchange ate Analysis
The author of this report is to follow the order of Dorchester Inc. And analyze the exchange rates for three different countries. The author will use the United States Dollar (USD) as the common currency and then compare/contrast the exchange rates of the dollar against the Euro, the Yen and the Australian Dollar. All three will be looked at over the last five years using the Bloomberg website. While one would expect these three charts to be at least somewhat similar, they are actually quite different and no two of the three are remotely alike.
The USD/YEN rate, which compares the currencies of Japan and the United States, shows some very sharp activity over the recent years. Of course, 2010 marked a year where the United States and much of the rest of the world was in a sharp recession. While the worst was from late 2007…
Bloomberg. (2014, September 29). USD to JPY Conversion Chart. Bloomberg.com. Retrieved September 29, 2014, from http://www.bloomberg.com/quote/USDJPY:CUR/chart
Bloomberg. (2014, September 29). AUD to USD Conversion Chart. Bloomberg.com. Retrieved September 29, 2014, from http://www.bloomberg.com/quote/AUDUSD:CUR/chart
Bloomberg. (2014, September 29). EUR to USD Conversion Chart. Bloomberg.com. Retrieved September 29, 2014, from http://www.bloomberg.com/quote/EURUSD:CUR/chart
Currency Exchange ates
The author of this brief report has been asked to look at the subject of currency exchange rates and what they mean in terms of fiscal policy and the overall economic health of a country. The questions that will be answered will include whether the currency exchange rates for a country are an economic barometer of a country, the identification of an exchange rate and the comparison of its rate to the United States dollar and the primary factors that lead to the rate of exchange when it comes to comparing one country to another. While the currency exchange rate is indeed a good overall metric to look at when it comes to economic health, there are other figures and milestones that should get just as much, if not more, weight when it comes to ascertaining the economic health of a country.
As for whether currency…
Bergen, J. (2004). 6 Factors That Influence Exchange Rates. Investopedia. Retrieved 7 September 2016, from http://www.investopedia.com/articles/basics/04/050704.asp
Wheeler, B. & Hunt, A. (2016). Brexit: All you need to know about the UK leaving the EU - BBC News. BBC News. Retrieved 7 September 2016, from http://www.bbc.com/news/uk-politics-32810887
Changes in the spot rate of exchange between two countries can occur as the result of a change in the relative interest rates in those countries, a change in the balance of trade between those countries and changes in the inflation rates in those countries (Van Bergen, 2015).
The two that are most closely followed are the differences in the interest rates, and the differences in the inflation rates.
A forward is a contract that is written between a party and a counterparty, to exchange currency in a set amount at a set rate in the future. This is proprietary between the parties. A future is publicly-traded. So while it also sets a future date and price for a currency, it is publicly traded, the dates do not change, and the amount is fixed -- to increase the amount you have to buy or sell more futures.…
Van Bergen, J. (2015). 6 factors that influence exchange rates. Investopedia. Retrieved December 23, 2015 from http://www.investopedia.com/articles/basics/04/050704.asp
International Currency Markets
How did George Soros make money in the international currency markets? as it something to do with his understanding of the international financial system, or just good luck?
Hungarian-born George Soros started making a name in financial speculation in the late 1960s, when he started investing with his own fund known as the Quantum Fund. Soros's speculations began making big news and he was able to gather a rather large following. The bulk of his fortune came from attacks on major currencies. For example, he was able to off major attacks on the currencies of Great Britain and Italy by speculating against them. Soros would bet against the currencies on the exchange rate market in a big way. The news of Soros's moves would also gather a lot of publicity that furthered his cause. Once the market knew that Soros had bet against these countries then…
Baby Pips. (N.d.). How You Make Money in Forex. Retrieved from Baby Pips: http://www.babypips.com/school/how-you-make-money-in-forex.html
Delaney, D. (2008, June 25). Currency Forex Trading. Retrieved from Ezine: http://ezinearticles.com/?Currency-Forex-Market-Trading-How-Do-People-Make-Money-From-It?&id=2905108
Barry Eichengreen (2011) has speculated that the U.S. dollar may be on the decline as the world's vehicle currency. The dollar has performed this role since at least Bretton oods, when the financial and political might of the United States allowed it to take the lead in the global financial system from Great Britain. However, that lead is being challenged today by two other currencies. One is the euro, which derives from the Eurozone, a basket of nations that has an economy around the same size as the United States. The other is from the Chinese yuan, a currency that is pegged to some degree to the U.S. dollar, but which is backed by the world's third-largest economy (behind the U.S. And Eurozone) and one that is growing rapidly. The creation of the euro immediately fuelled speculation that it would overtake the dollar as the world's vehicle currency, and the…
Devereux, M. & Shi, S. (2008). Vehicle currency. University of Toronto working papers. Retrieved November 29, 2011 from http://ideas.repec.org/p/tor/tecipa/tecipa-315.html
Eichengreen, B. (2011). Why the dollar's reign is near an end. Wall Street Journal. Retrieved November 30, 2011 from http://online.wsj.com/article/SB10001424052748703313304576132170181013248.html
Goldberg, L. & Tille, C. (2005). Vehicle currency use in international trade. Federal Reserve Bank of New York, staff report #200.
Lim, B. & Qing, K. (2011). China to step up ASEAN yuan trade settlement. Reuters. Retrieved November 29, 2011 from http://www.reuters.com/article/2011/10/20/us-china-economy-yuan-idUSTRE79J2JR20111020
8% as compared to the dollar in the start of the last year to January this year. The value of Yuan has improved even with the fall of other emerging economies. The loss of competitiveness that resulted can be best demonstrated by a ratio that has been calculated by the Hong Kong Monetary Authority, which makes a comparison of Yuan with the currency of the other emerging markets that are in competition with China. It is important to note here that the competitors of China are the countries that trade against it, and not necessarily the countries that trade with it. The index calculated by the authority demonstrates that Yuan has been rising over 13% in the year to January. As for January alone, the value of the Chinese currency has risen by 2.6%.
The authorities of China have not said that they had made a move in to weaken…
Hefeker, C., & Nabor, A. (2002). Yen or Yuan? China's role in the future of Asian monetary integration. HWWA Discussion Paper.
Kent, C. (2013). USD is dead: China caps its dollar holdings and plans crude oil futures priced in yuan. Hang The Bankers. Retrieved from http://www.hangthebankers.com/usd-is-dead-china-caps-its-dollar-holdings-plans-crude-oil-futures-priced-in-yuan/
Leising, M., & Li, F. (2013). China to Free Yuan in 5 Years, Says Hong Kong Exchanges' Li. Bloomberg. Retrieved from http://www.bloomberg.com/news/2013-03-13/china-to-free-currency-in-5-years-says-hong-kong-exchanges-li.html
Mallaby, S., & Wethington, O. (2012). Future of the Yuan: China's Struggle to Internationalize Its Currency, The. Foreign Aff., 91, 135.
Wal-Mart Accounting and Finance
Determine whose rate of return (i.e., local or parent currency returns) Wal-Mart should use when evaluating foreign direct investment opportunities and justify the position.
Foreign Direct Investment (FDI) is an international flow of capital that provides a parent company or multinational organization with control over foreign affiliates. The behavior of exchange rates influences FDI activity. Exchange rates are defined as the domestic currency price of a foreign currency. Exchange rates can influence both the total amount of foreign direct investment that takes place and the allocation of this investment spending across a range of countries (Bogoslaw, 2009).
Wal-Mart is among many multinational companies that have expanded production and distribution networks globally to take advantage of opportunities for higher local rates of return, market share, and accessibility to production inputs (Nathan, 2012). This -- along with foreign government import restrictions, opening of new markets and invitation for…
Bogoslaw, D. (2009). Emerging Markets: Time to Invest?. Businessweek Online, 8.
Huang, Q., Nijs, V., Hansen, K., & Anderson, E. (2012). Wal-Mart's Impact on Supplier Profits. Journal Of Marketing Research (JMR), 49(2), 131-143. doi:10.1509/jmr.10.0256.
Marshall, J. (2000). Minor Change, Big Impact. Financial Executive, 16(6), 11.
Nathan, A.J. (2012). Wal-Mart in China. Foreign Affairs, 91(3), 190-191.
Translation, eporting, And Prices
Briefly describe the corporation you researched.
The organization researched is a multinational called Walmart. The chain store is a retailer organization whose home office is located in America. The company operates by providing products to its customer through a chain of retail outlets. The public owned organization is the largest in the global market. The company has grown over the years through implementing policies that allow it to sell at a lower price that its competition. The company is the largest retailer is the globe with majority of its shares held by the public. The founding family still has a controlling share of the business with the family controlling over 48% of the shares. The company founded in 1962 and incorporated in 1969 is among the most successful companies in the globe. Its headquarters is located in Arkansas and is currently the largest grocery retailer in…
Akta?, R., & Kar?
n, M. (2011). Timeliness of Reporting and the Quality of Financial Information. International Research Journal Of Finance & Economics, (63), 71-77.
Albuquerque, R., De Francisco, E., & Marques, L.B. (2008). Marketwide Private Information in Stocks: Forecasting Currency Returns. Journal Of Finance, 63(5), 2297-2343.
Bartov, E. (1997). Foreign Currency Exposure of Multinational Firms: Accounting Measures and Market Valuation. Contemporary Accounting Research, 14(4), 623-652.
The Chinese currency was selected as the focus of this study for several reasons. The primary reason behind this selection is the rising importance of the Chinese currency's valuation compared to other major world currencies. This is because of China's already large and still-growing trade presence in all global markets and the artificial nature of its currency's valuation, as the government manipulates the exchange rate for the enminbi by tying it to certain other currencies rather than allowing it to "float" with market forces as do most other countries in the developed and developing world (India Times 2010). Despite this artificial hold on the currency, however, the enminbi has been allowed to appreciate in value at an increasing rate, and this is beginning to have an effect on the significant trade surplus that the country has long maintained (India Times 2010). The fact that China is the world's second…
India Times. (2010). U.S.-China trade and currency row rumbles on at APEC summit. Accessed 27 January. http://economictimes.indiatimes.com/news/international-business/U.S.-China-trade-and-currency-row-rumbles-on-at-APEC-summit/articleshow/6921709.cms
Lin, J. (2004). Lessons of China's Transition from a Planned Economy to a Market Economy. Leon Kozminski Academy of Entrepreneurship and Management (WSPiZ) and TIGER Distinguished Lectures Series n. 16.
Eurozone Maastricht Treaty
Euro zone Treaty
The European Community established the convergence criteria. These criteria was established in order to allow its EU Member states to take part in the Euro Zone, and using the Euro, as an official currency. The members of the European Union formed the Maastricht Treaty in 1992. The principle goals of the treaty were to establish an economic and monetary union, strengthen the democratic legitimacy of its institutions, better the effectiveness of its institutions, come up with the community social dimension, and also establish a unified foreign and security policy (Charles 1998).
The criteria contain several principles governing inflation rates, government finance, exchange rate, and long-term interest rates. The percentage points for inflation rates should not be 1.5 higher than the average the top three members states in performance of the EU. Government finance covers both the annual government deficit and the government debt. Under…
Charles K. (1998). Interest Rates: A Decision-Making Approach. New York, NY: Dryden
David, J.H. (1999). "Advertising's Overdue Revolution" Speech delivered at the week
New York, NY: John Wiley & Sons
Managing Exchange ate isk
For a number of multinational corporations, currency fluctuations can pose an extreme risk for them. This is because of sudden changes and dramatic amounts of volatility inside the marketplace can have a negative effect on their bottom line results. When this happens, there is a realistic possibility that these challenges could negatively impact their financial position and ability to compete inside many different markets. (Berger, 2011)
In the case of Fed Ex, the company has operations around the globe and is one the larger overnight package delivery services. This means that sudden shifts in the currency could negatively impact their earnings. To fully understand the overall scope and the way they are able to deal with these challenges requires focusing on how this impacts their operations, options financial managers can use to manage it and the benefits / drawbacks of these strategies. Together, these elements will…
Fed Ex. (2013). Yahoo Finance. Retrieved from: http://finance.yahoo.com/q/pr?s=FDX+Profile
Fed Ex First Quarter Results. (2012). IPC. Retrieved from: http://www.ipc.be/en/Newsroom/General%20news/FedEx%20reports%20first-quarter%20results
Berger, A. (2011).Case Study Fed Ex Corporation. Nordstadt: Verlag.
Grady, G. (2010). Foreign Exchange Risk Management Methods. E Zine Articles. Retrieved from http://ezinearticles.com/?Foreign-Exchange-Risk-Management-Methods&id=3047383
functions of the International Monetary system, a few significant institutions which deal with foreign currency as well as conclude on which system of exchange rates is more useful in the corporate world.
History of the International Monetary System:
In the start of the economical world, people were commonly in the habit of using the barter system to purchase goods that were in need. With time though, the system of trading gold and silver coins started to evolve. Around the 19th century, officially, countries started issuing themselves a basic currency. This marked as the beginning of the modern day monetary system of trade.
In the Pre-World War era, money unions evolved which enabled people of different countries to easily exchange currencies. In this period of time, there was a low level of financial crisis and economies were growing steadily. However, with the World War going on, global trade and the flow…
Eichengreen, B. (2008). Globalizing capital: A history of the international monetary system. Princeton University Press.
Stein, J.L. (1997). Fundamental determinants of exchange rates. University of Oxford.
The World Bank (2005). Getting to know the world bank: A guide for young people. The World Bank
Thornton, R.C. (2001). The nixon-kissinger years: Reshaping America's foreign policy. Paragon House.
Managing Financial isk including Currency Exchange ate isks
Deere and Company are suffering as the string dollar is impacting negative on sales in the Euro zone. The firm is suffering not only due to the exchange rate, but also the high level of competition from other European firms that are operating in the Euro.
If companies operate across international boarders they will face risks associated with exchange rate movement. In the case of a strong home currency, this will make the goods more expensive to purchase if the pricing is based in the home currency. The basing of the price on the dollar, even if it is converted to Euro's effectively passes the risk to the purchaser. The impact can be the price becoming uncompetitive, especially when there are firms that are basing their pricing structure on the same currency as the purchasers.
The firm may deal with the…
Howells P.G.A, Bain, K, (2007), Financial Institutions and Markets, London, Longman
WalMart, (2014), WalMart Annual report, accessed at http://stock.walmart.com/annual-reports
currency risk to which the PPP Group was exposed. The paper also considers their options for currency risk management, in particular evaluating how PPP Group can manage their translation exposure risk.
Types of Currency Risk
The PPP Group's international transactions subject the firm to currency risk or exchange rate risk which arises with the potential change in the exchange rate of EUR against USD. The PPP Group is exposed to three kinds of currency risk that must be managed: transaction risk, translational rick and economic risk. Transaction risk is associated with the time delay that occurs between PPP Group's entering into contracts to purchase paper supplies and the actual contract settlement. PPP Group is also exposed to translation risk which the is the risk of adverse effects on their financial statements, possibly affecting the company's assets, liabilities, equities or income, due to changes in currency exchange rates. PPP Group is…
Financial Accounting Standards Board, 1981. Foreign currency translation. [online] Available at: [Accessed 13 December 2011].
FTMandate, 2005. Reducing risk by currency hedging. [online] Available at: [Accessed 13 December 2011].
Moore, M., 2006. Measuring/Managing translation and transaction exposure. [online] Available at: [Accessed 13 December 2011].
U.S. Department of Commerce, 2008. Foreign exchange risk management. [online] Available at: [Accessed 13 December 2011].
Future of the Dollar
is the world's reserve currency of choice, but at various points in its history, critics have pointed to other currencies as potential vehicle currencies of choice. hile in the 1970s or 80s it might have been the yen or the deutschmark, the creation of the euro in 1999 brought a new competitor onto the scene. In its first few years, the euro became increasingly popular. ith the Eurozone having an economy nearly as large and robust as the American economy to back it, the 'common currency' began to make inroads as the world's vehicle currency. Nations with closer ties to Europe than to the United States were among the first to make the switch, but many major nations have some operations (debt issues, for example) in euros. Today, there is also some speculation that the yuan could take over as a vehicle currency, or…
CIA World Factbook. (2011). GDP (Purchasing Power Parity). Central Intelligence Agency. Retrieved November 24, 2011 from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html?countryName=United%20States&countryCode=us®ionCode=noa&rank=2#us
Eichengreen, B. (2011). Why the dollar's reign is near an end. Wall Street Journal. Retrieved November 24, 2011 from http://online.wsj.com/article/SB10001424052748703313304576132170181013248.html
Fisk, R. (2009). The demise of the dollar. The Independent. Retrieved November 24, 2011 from http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html
Gow, D. (2011). Shock as €6 billion German bond sale ends in failure. The Guardian. Retrieved November 23, 2011 from http://www.guardian.co.uk/business/2011/nov/23/eurozone-doomed-without-central-control-barroso
There are also non-qualitative, or financial risks, associated with foreign currency loans. Namely, because foreign currencies can be effected by such uncontrollable as political, governmental and natural factors, a foreign currency can suddenly change in a manner that either significantly benefits or disadvantages the borrower. For example, often time the rate of a foreign currency is based on such things as internal, regional or international political conditions. If a particular country has a significant political upheaval, the instability associated with such an event can have a negative impact on a nation's economy, which of course effects the foreign currency exchange rate and, thus, the borrowers investment. When such an event happens to a nation with a dominant currency, this change can have devastating effects on a loan, as was the case following the September 11, 2001 terrorist attacks on the United States.
Another means to reduce risk is to use…
Almekinders, Geert J. (1995): Foreign Exchange Intervention: Theory and Evidence. New York: Edward Elgar Publishing, Inc.
Eijffinger, Sylvester. Foreign Exchange Intervention: Objectives and Effectiveness. New York: Edward Elgar Publishing, Inc.
S. Treasuries (Gjelten, 2009).
What hasn't happened "officially," i.e. The establishment of a formal IMF SDR world currency system or some other form of a supranational currency, seems to be occurring in the market anyway, but just in a more informal fashion. For instance, already central banks throughout the world are favoring euros and the yen over the dollar as illustrated by the following numbers (Euro, yen to replace dollar as world reserve currency, 2009). During July through September 2009, banks put 63% their new cash into euros and the yen. As a result, the dollar's share of new cash in the central banks was down to 37 compared with approximately 67% a decade ago. Currently, according to the IMF, dollars account for about 62% of the currency reserve at central banks -- the lowest on record (Euro, yen to replace dollar as world reserve currency, 2009). Further, if China…
Amadeo, K. Dollar decline or dollar collapse? http://useconomy.about.com/od/inflation/i/dollar_decline.htm
Batson, a. (2009, March 24). China takes aim at dollar. The Wall Street Journal. http://online.wsj.com/article/SB123780272456212885.html#mod=fox_australian
Daniels, J.D., Radebaugh, L.H., & Sullivan, D.P. (2007) International business: Environments and operations. Upper Saddle River, NJ: Pearson/Prentice Hall. ISBN: 0131869426.
Davidson, a. (2009, March 23). Bejing shows buyer's remorse. Forbes. http://www.forbes.com/2009/03/23/china-dollar-ditch-markets-economy-dollar.html
Down? The Value of the Dollar
International Currency Exchanges
Current Trends and Initiatives
Impact of the Euro on Dollar Valuation
Analysis of Current Trends and Initiatives on Dollar Valuation in the Future
Up or Down? The Value of the Dollar: A Historical Analysis of the Valuation of the U.S. Dollar
According to Michael Artis, Elizabeth Hennessy, and Axel eber (2000), capital losses can be caused by differential changes in the value of assets and liabilities, primarily exchange rate changes; these changes affect the value of a central bank's foreign exchange reserves. To date, exchange rate changes have only been a major problem for national central banks with very large foreign exchange reserves (i.e., Portugal); however, it might also become a problem for the European Central Bank in the future, whose balance sheet on the asset side will be dominated by the approximately 40 billion euro in foreign exchange reserves it…
Arthurs, Harry. (1996). "Globalization and Its Discontents." Journal of Business
Administration and Policy Analysis, 24-26, 132.
Artis, Michael, Elizabeth Hennessy and Axel Weber (Eds.). The Euro: A Challenge and Opportunity for Financial Markets. London: Routledge, 2000.
Charrette, Susan and Juann Hung. (1997). "The Looming U.S. External Debt. How Serious is
Most developed economies, however, allow the market to set exchange rates, only influencing currency values through indirect means such as the increased or reduced sale of bonds to foreign entities and individuals, or through other means of international wealth exchange. Essentially, all manipulations of exchange rates and actions based on predictions of exchange rates are focused on the forward exchange rate, or the predicted rate of exchange between two currencies at a future point in time.
The spot exchange rate, on the other hand, is the rate of exchange at the current moment in time. It is through a comparison of the spot rate and the forward rate of exchange -- inasmuch as it can be predicted with any accuracy -- that companies and businesses make decisions that affect either the exchange rate itself (in the case of some governments, notably China in the modern period), or more often make…
Christofferson, Peter F. Elements of Financial Risk Management. San Diego: Elsevier Sciences, 2003.
Comptroller of the Currency Administrator of National Banks. Interest Rate Risks. 1997. Accessed 19 March 2010. http://www.occ.treas.gov/handbook/irr.pdf
Cusatis, Patrick and Martin R. Thomas. Hedging Instruments and Risk Management. New York: McGraw Hill, 2005.
Dun & Bradstreet. Financial Risk Management. New Delhi: McGraw Hill, 2008.
The stability is evident in the statistics as well. Between 1880 and 1914, the golden age of the gold standard, inflation averaged 0.1%. Between 1946-2003, even with Bretton oods, inflation average 4.1% (Bardo, n.d.). Short-term price changes, however, could be highly unstable. This is a consequence of the fact that the gold standard ignores fundamental economic principles. Any system where the value of a good is established by artificial means is subject to such shocks. Another drawback to the gold standard is that it gives governments very little discretion over monetary policy. Another drawback is the cost of producing gold. The gold standard relies on having physical gold reserves. Thus, gold must be produced, and for that there is a cost (Ibid).
ith the decline of Bretton oods, the gold standard died. It was replaced by the modern foreign exchange system. At the core of this system are fiat currencies.…
Bordo, Michael D. (no date). The Gold Standard. Concise Encyclopedia of Economics. Retrieved April 11, 2009 from http://www.econlib.org/library/Enc/GoldStandard.html
Cohen, Benjamin. (no date). Bretton Woods System. University of California at Santa Barbara Retrieved April 11, 2009 from http://www.polsci.ucsb.edu/faculty/cohen/inpress/bretton.html
Antecedents and Outcome of Russia's Currency Crisis
Although the former Soviet Union has collapsed, losing much of its territorial possessions, Russia is still the largest country in the world and what happens to the Russian economy can have a profound effect on the rest of the world as witnessed during its currency crisis in 1998. This paper reviews the relevant literature to identify the antecedents of this most recent financial crisis compared to previous financial crisis in the country to identify similarities and differences. Finally, a summary of the research and important findings concerning these issues are presented in the conclusion.
The most recent currency crisis that Russia experienced occurred beginning in August 1998 (Robison 246). In this regard, Chiodo and Owyang report that, "A currency crisis can be defined as a speculative attack on a country's currency that can result in a forced devaluation and possible debt…
Caglayan, Mustafa and Ulutas, Sevan. (2014, Spring). "Emerging Market Exposures and the Predictability of Hedge Fund Returns." Financial Management 43(1): 149-155. Print.
Cassidy, John. (2014, December 16). "Has Russia Learned the Lesson of Past Currency Crises?" The New Yorker. Web.
Chiodo, Abbigail J. and Owyang, Michael T. (2002, November/December). "A Case Study of a Currency Crisis: The Russian Default of 1998." Review - Federal Reserve Bank of St. Louis 84(6): 7-11. Print.
De Souza, Lucio. (2008, June 13). "A different country: Russia's economic resurgence." VOX. Web.
Theoretically speaking, there is only one factor affecting the exchange rate of a country adopting a floating exchange rate regime: the supply and demand of the respective currency on the international market. In this sense, if demand exceeds supply, then the value of the currency will go up and the respective currency will appreciate. On the other hand, if supply exceeds demand, the currency will depreciate and the price of the currency will decrease.
Starting from this statement, however, we can discuss several different factors that make the demand and supply vary, affecting thus the exchange. First of all, we have the level of the interest rate in a country. If the interest rates are higher, then foreign investors will choose to enter the national capital markets, purchase local currency and invest in local bonds or T-bills, which bring high returns, due to high interest rates. This mechanism will lead…
1. Fixed and Floating Exchange Rates. (2003). On the Internet at http://www.tutor2u.net/economics/content/topics/exchangerates/fixed_floating.htm
2. S Johnson (July 2004). Dollar falls as data put focus on U.S. deficit. Financial Times
3. Fixed and Floating Exchange Rates. (2003). On the Internet at
International Monetary System and Exchange ate Policies
A report/essay: chapter 17, multinational companies. select topic research write: Multinational vs. domestic financial management exchange rates international trade international monetary system exchange rate policies trading foreign exchange european monetary union interest
rate parity/purchasing power parity international capital structures.
The international monetary system and exchange rate policies
International Monetary systems
These are a set of rules and that regulate how international trade and payments are handled. It facilitates the exchange of capital, goods and services among countries. However, this system does not have a physical presence but, it consists of interlacing rules and procedures and is influenced by the market of foreign exchange. An example of an international monetary system is the International monetary fund. These interlacing rules and procedures are referred to as exchange rate Policies.
Exchange rate policies
These are rules that officials of public finance from different nations have developed…
Eichengreen. (2011). Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System
Goyal, M., Raman, Wang, and Ahmed; . ( 2011). Financial Deepening and International Monetary Stability.
Michael C. Ehrhardt, & Eugene F. Brigham. (2011). Corporate Finance (4th ed.): Cengage.
OECD. (2011). The Effects of Oil Price Hikes on Economic Activity and Inflation.
Coca-Cola Company ("Coca-Cola," "Coke") is a U.S.-based manufacturer and distributor of non-alcoholic beverage. The company recorded revenue of $46.5 billion in FY2011, and earned $8.5 billion in net income. According to the company's website, it sells products in over 200 countries, given the company near-global scope. This also ensures that Coca-Cola has substantial exposure to foreign currencies. This report will discuss a number of international financial aspects to Coca-Cola's business, including foreign currency risk and capital structure.
As Coca-Cola operates in just about every country in the world, there are a very few options for international expansion. The company's Mexican subsidiary is already exporting to Cuba, circumventing Helms-Burton. However, there remains one country where one cannot currently buy a Coca-Cola product, and that is the Democratic People's Republic of Korea (DPRK), or North Korea (Hebblethwaite, 2012). There is increasing wealth in that country, however, as the result of Chinese investment.…
Coca-Cola 2011 Annual Report. Retrieved December 11, 2012 from http://ir.thecoca-colacompany.com/phoenix.zhtml?c=94566&p=irol-financials
Hebblethwaite, C. (2012). Who what why: In which countries is Coca-Cola not sold? BBC News Magazine. Retrieved December 11, 2012 from http://www.bbc.co.uk/news/magazine-19550067
MSN Moneycentral. (2012). Coca-Cola Company. Retrieved December 11, 2012 from http://investing.money.msn.com/investments/stock-income-statement/?symbol=KO
Park, J. (2012). North Korea's economic dreams are, well…dreams. Reuters. Retrieved December 11, 2012 from http://www.reuters.com/article/2012/11/04/us-korea-north-economy-idUSBRE8A30KM20121104
In fact, the UN's official policy attempts to limit the types of conditions that can be placed on debt forgiveness for third-world and developing nations. Despite this fact, it would be simplistic to state that G8 should not have the ability to make financial decisions independent of the UN and other international influence. As the countries that have provided the majority of financing for the world's poorest countries, it may be that the continued financial health of those countries depends upon them getting a financial benefit from such financial assistance. Therefore, the current world economy may actually depend on the ability of G8 to operate independently from the broader international community.
Q3: How does the Fisher effect impact the ability to forecast currency exchange rates? If the real interest rate is constant across borders, one would expect a constant currency exchange rate, but this does not occur. On the contrary,…