Introduction
Foreign Exchange Market
a market for converting the currency of one country into that of another country
Exchange Rate
the rate at which one
currency is converted
into another
The Functions of the Foreign Exchange Market
Currency Conversion
To convert the currency of one country
into that of another country
Insuring against Foreign
Ⅱ. Exchange rate regime
1. What is the exchange rate?
In finance, the exchange rates between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency. For example an exchange rate of 91 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that 91 yen is worth the
Determination of Won/USD Exchange Rate With Respect to Global Oil Price Change
To see the relationship between exchange rate and oil price, we use econometrical methodology, multiple regression. Our regression model is this:
s_t=β_1+β_2 (m_t-m_t^* )+β_3 (y_t-y_t^* )+β_4 〖lroil〗_t+u_t
*Explanation about explanatory variable
s_t : Nominal exchange rate (USD/Won)
m_t-m_t^*
2. Policy Analysis with Partial Capital Mobility
• Expansionary fiscal policy, fixed exchange rates
IS curve shifts right, Y and R increase.
Higher R increases foreign capital inflow.
• Creates BP surplus and upward pressure on currency.
Central bank intervenes in the foreign exchange market.
• Buys excess foreign currency.
Incr
I. Introduction of currency wars
War using the exchange rate policy has been sustainable like Europe’s exchange rate policy in the early 20th century and Japan’s exchange rate policy after World War II. Recently, Economic purposes such as restoring slowdown of economy due to financial crisis and recovery of trade deficit are combined with political purpose and retaliatory currency manipul
Ⅱ. Effects of RMB appreciation on China
□ Exchange rate system of China
- The Chinese exchange rate system is the fixed exchange rate system which is fixed to the dollar. In 1994 January 1, China unified the official exchange rate and the market exchange rate and adopted a managed floating exchange rate system that restricted one day exchange rate fluctuation band with ±0.3% of the precedi
Class Object!
Understand and be able to explain the concept of exchange rates as they are used in international trade
Be able to predict and take advantage of the relationship between the balance of payments and the exchange rates.
Reasons of altered Exchange Rate
Why Exchange Rate altered ?
→ To exchange Korean money with other nation’s money means that we are buying othe
DEFINITION
A system that is in a middle of fixed and flexible. It limited the range of exchange rate fluctuation about certain currency within certain range(1~2.25%).
The fixed exchange rate system ( 1945. 10 ~ 1964. 5 )
The unitary fluctuation foreign exchange system ( 1964. 5 ~ 1980. 2 )
The multicurrency basket system ( 1980. 2 ~ 1990. 2 )
Average exchange rate system ( 1990. 3 ~
: Interest Rate ↑→ Currency↑
Japanese Yen surged by 4.6% to 80 yen per dollar just within minutes on Wednesday in practice and it was the biggest move in history
Insurance companies and many other Japanese Companies withdrew their foreign investments and exchanged them for Yen
in order to cover insurance and restore the country.
Yen became in demand and got strengthened.
not exist,
then either:
• The currency must appreciate or depreciate, or
• The central bank must intervene to stabilize the currency
• Downvaluation
-> Exchange rate increase
• IS curve will shift right.
• Buys excess foreign currency.
and Sells domestic currency.
• LM curve will shift right.
• As a result, Y increases.