- The market for foreign currencies is a worldwide market that is informal in structure
- The “market” is actually the thousands of telecommunications links among financial institutions around the globe and it is open nearly 24 hours a day
- Until recently there was little data on the actual volume of trading on world foreign currency markets
- In the spring of 1986, the Federal Reserve Bank of New York along with others started surveying the activity of currency trading every three years
- Growth of foreign currency trading has been nothing less than astronomical
- The majority of the world’s trading in foreign currencies is still taking place in the cities where international financial activity is centered, London, New York, and Tokyo
Market Size and Composition - Three reasons typically given for the enormous growth in foreign currency trading are:
The Purpose of Exchange Rates - If countries are to trade, they must be able to exchange currencies
- The exchange of one country’s currency for another should be relatively simple, but it’s not
What is a Currency Worth? - The exchange rate between currencies should equalize its purchasing power
- The theory of purchasing power parity (PPP) is simply the rate that equalizes the price of the identical product or service in two different currencies
- The version of purchasing power parity that estimates the exchange rate between two currencies using just one good or service as a measure of the proper exchange for all goods and services is called the Law of One Price
Do'stlaringiz bilan baham: |
