Learning Objectives - To understand how currencies are traded and quoted on world financial markets
- To examine the links between interest rates and exchange rates
- To understand the similarities and differences between domestic sources of capital and international sources of capital
- To examine how the needs of individual borrowers have changed the nature of the instruments traded on world financial markets in the past decade
- To understand how the debt crises of the 1980s and 1990s are linked to the international financial markets and exchange rates
The Market for Currencies - The price of any one country’s currency in terms of another country’s currency is called a foreign currency exchange rate
- Every market, every country, and every firm may have its own set of currency symbols
- Direct quotation: when the subject currency is stated first
- Indirect quotation: when the subject currency is stated second
- Spot rates: when the exchange of currencies takes place immediately
- Forward rates: when the currency exchange takes place at a later date and at an agreed upon exchange rate
Direct and Indirect Quotations - Most currencies are quoted in direct quotes versus the U.S. dollar
- The major exceptions are currencies associated with the British Commonwealth and the European euro
- When an exchange rate of a currency is stated without using the U.S. dollar as a reference, it is referred to as a cross rate
Do'stlaringiz bilan baham: |
