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Exchange Rates-

International Finance. Exchange Rates-. Number of 1 country’s currency that is equal to 1 unit of another country’s. $1 = 0.6292 € $1 = 0.5051 £. 1€ = $ 1.5892 1£ = $ 1.9797. $1 = 0.7535 € $1 = 0.6809 £. 1€ = $ 1.33 1£ = $ 1.47. International Rates.

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Exchange Rates-

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  1. International Finance Exchange Rates- Number of 1 country’s currency that is equal to 1 unit of another country’s $1 = 0.6292€ $1 = 0.5051£ 1€ = $ 1.5892 1£ = $ 1.9797 $1 = 0.7535€ $1 = 0.6809£ 1€ = $ 1.33 1£ = $ 1.47

  2. International Rates

  3. International Rates

  4. International Rates

  5. Appreciation or Depreciation

  6. How many $$ you get with one of theirs? How many $$ does it take to get one of theirs?

  7. Types of Exchange Rates 1. Fixed a. $1 = 1/35 oz of Gold b. 4 German marks = 1/35 oz of Gold c. $1 = 4 German marks d. Devaluation – change rate

  8. Types of Exchange Rates 2. Flexible a. aka Floating b. Determined by supply and demand c. $1 = 4 German marks d. Depreciation – change rate

  9. Types of Exchange Rates 3. Pegged a. Tied to another currency b. Often the $

  10. Venezuela

  11. Venezuela

  12. Venezuela

  13. Venezuela

  14. Venezuela

  15. Lebanon

  16. Lebanon

  17. Lebanon

  18. Lebanon

  19. Lebanon

  20. Lebanon

  21. Lebanon

  22. Currency Exchange Buyers and Sellers Determine Exchange Rate $ Price of currency $6 D S $5 $4 $3 $2 D $1 S 0 10 20 30 40 60 50 Quantity of Currency

  23. Factors Influencing Exchange 1. Demand for foreign products 2. Changing economic conditions - Inflation makes goods more expensive 3. Interest Rates 4. Government Intervention Pegging

  24. Would the value of the dollar, compared to the Swiss franc, increase if the exchange rate went from 1.3 francs = $1 to 1.2 francs = $1?

  25. Changes in the Exchange Rate • Determinants: • A change in national income (relative to trading partners) people buy more, or less of everything. • A change in the inflation rate in one country. a. Higher rate decreases demand b. Lower demand - depreciation • A change in interest rates (relative to rates abroad). a. High rates attract money b. Currency appreciates 4. Changes in tastes

  26. $: (1)Appreciation or (2)Depreciation? • The US reduces tariffs on Mexican products. • Mexico encounters severe inflation. • Deteriorating political relations reduce American tourism in Mexico. • The US economy moves into a severe recession • A bartender puts a lime in a Corona and beer sales jump • The Mexican government encourages American firms to invest in Mexican oil fields • A large federal government budget deficit raises interest rates in the US

  27. Euro: (1)Appreciation or (2)Depreciation? • An American importer purchases a shipload of Bordeaux wine. • BMW decides to build an assembly plant in LA • A CVCC student decides to spend a year studying at the Sorbonne. • A Spanish manufacturer exports machinery to Morocco on an American freighter. • The US incurs a balance of payments deficit in its transactions with Belgium. • A US government bond held by an Italian citizen matures. • It is widely believed that the international value of the Euro will fall in the near future.

  28. Would each of the following developments cause the dollar to appreciate or depreciate? a. The perception by other countries that the quality of US goods is improving b. A large budget deficit that raises interest rates in the US c. Intervention by the Federal Reserve in foreign exchange markets that results in dollars moving into those markets d. A poor harvest in most of the grain-producing countries of the world except the US e. The expectation of war between several Middle Eastern countries.

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