...CENTRAL BANK A central Bank is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. The central bank often also oversees the commercial Banking system within its country. A central Bank is distinguished from a normal commercial bank because it has a monopoly and creating the currency of that nation, which is usually that Nations legal tender. Central Bank of Kenya is the highest Banking institution in the country and responsible for ensuring the smooth working of banking sector and other financial institutions. Central Bank differs from commercial banks in that it does not engage in ordinary banking activities e.g. accepting deposits from the general public. It is owned by the government while commercial banks are owned by shareholders. CBK usually implements certain government policies. OBJECTIVES OF CENTRAL BANK OF KENYA i. To formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices. ii. The Bank fosters the liquidity, solvency and proper functions of a stable market based financial system. iii. Support the economic policy of the government including its objectives for growth and employment. iv. Formulate and implement foreign exchange policy v. Hold and manage its foreign exchange reserves. vi. License and supervise authorized dealers vii. Formulate and implement such policies as best promote the establishment...
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...No.s 1. Foreign Exchange Market 02 2. Foreign Exchange Rate 03 3. Determinants of Foreign Exchange Rates 04 4. Exchange Quotation 06 5. Direct Quotation (Home Currency) 08 6. Indirect Quotation (Foreign Currency) 09 7. Conclusion 10 Foreign Exchange Market Introduction: • Today no country is self sufficient in its demand and supply of goods and services and factors of production such as labour and capital are seen moving freely across the national frontiers. • All the countries trade in goods and services, borrow and lend, invest and accept investments with other countries with nominal or full control to govern the currency flow and trade. • Since different countries have their own currencies (with different purchasing power), the settlement of payments cannot be made with the currency of one country. Meaning: • The Foreign Exchange market is a decentralized world-wide market; the participants in the market include central banks, commercial banks, brokers, corporations and individuals. • The central banks monitor both market movements and sentiments and intervene according to government policy and prevailing situation. Functioning: • International economic and commercial relations between countries involve exchange of goods and services and payment for these exchanges. • The payments lead to conversion of one currency into another. • Each country has its financial system and its own currency and financial assets. • Exchanges between the...
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...Abstract INTRODUCTION When first looking at an exchange rates, and foreign exchange, there are a few questions which must be considered. What factors affect the demand and supply of Australian dollars in the foreign exchange markets? Distinguish between the possible causes and effects of currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the past few years that have affected the value of the Australian dollar? In addition to looking further into those questions, it is helpful to know what the word Exchange Rate means; it is defined as, “The rate at which one unit of domestic currency is exchanged for a given amount of foreign currency.” A BRIEF HISTORY OF THE AUSTRALIAN DOLLAR Until 1971, the Australian dollar (AUD) was “pegged” to the British pound. This meant that the AUD rose or fell in line with the pound. In 1971, the AUD became pegged to the US dollar instead. These currencies were fixed currencies, which meant that the Australian currency would only change value when a major world currency also changed. This system lasted only until 1974 when the AUD became pegged to a trade-weighted selection of other currencies. This was still a fixed currency. In 1976 this selection of currencies became moveable. Small shifts were able to take place when needed. In 1983 the AUD became a floating currency. This means that the value of the dollar is determined by supply and demand. Initially, the Reserve...
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...The Australian Exchange Rate Abstract INTRODUCTION When first looking at an exchange rates, and foreign exchange, there are a few questions which must be considered. What factors affect the demand and supply of Australian dollars in the foreign exchange markets? Distinguish between the possible causes and effects of currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the past few years that have affected the value of the Australian dollar? In addition to looking further into those questions, it is helpful to know what the word Exchange Rate means; it is defined as, “The rate at which one unit of domestic currency is exchanged for a given amount of foreign currency.” A BRIEF HISTORY OF THE AUSTRALIAN DOLLAR Until 1971, the Australian dollar (AUD) was “pegged” to the British pound. This meant that the AUD rose or fell in line with the pound. In 1971, the AUD became pegged to the US dollar instead. These currencies were fixed currencies, which meant that the Australian currency would only change value when a major world currency also changed. This system lasted only until 1974 when the AUD became pegged to a trade-weighted selection of other currencies. This was still a fixed currency. In 1976 this selection of currencies became moveable. Small shifts were able to take place when needed. In 1983 the AUD became a floating currency. This means that the value of the dollar is determined by supply...
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...The foreign exchange market does not have a physical market place called the foreign exchange market. It is a mechanism through which one country's currency can be exchange i.e. bought or sold for the currency of another country. The foreign exchange market does not have any geographic location. The market comprises of all foreign exchange traders who are connected to each other through out the world. They deal with each other through telephones, telexes and electronic systems. The foreign exchange market operates twenty four hours a day during the business week; the only time it is silent is after the New York market closes on Friday afternoon and before the Sydney market opens on Monday morning (which would be Sunday evening New York time). In the aftermath of the Asian crisis, which curbed and restricted offshore trading in regional currencies, most derivatives markets in Asia are still in their infancy. Financial institutions trying to introduce or transplant products from mature markets to those that are lesser developed are meeting with limited success. The RBI has ushered rupee derivatives trading into the country: it has formally allowed banks and corporate to hedge against interest rate risks through the use of interest rate swaps (IRS) and forward rate agreement (FRA). According to the guidelines issued by RBI there will be no restriction on the tenure and size of the IRS and FRA entered into by banks. The IRS will also allow corporate to hedge their interest rate...
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...environmental factors including federal regulations and the economy. The U.S. financial markets impact the economy, businesses, and individual by the movement of funds among financiers, businesses and governments. It involves investments in the area of sales or marketing of securities, the management of investment risk through portfolio diversification and the analysis of securities. Melicher, R. W., & Norton, E. A. (2011).Pg. 6 The U.S. Federal Reserve is the central bank of the United States and is responsible for regulating the banking system, setting monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. ("What is the," 2013) The role of the U.S. Federal Reserve is important for the U.S. payment system. It provides banking service for the twelve Federal Reserve Banks by providing banking service to depository institutions and to the federal government. The depository institutions maintain accounts including collecting checks and provide various payment services, distributing and receiving currency and coin, and electronically transferring funds. Melicher, R. W., & Norton, E. A. (2011). The Federal Reserve Chairman is a position with high ethical standards and morals; a high standard are a must. A successful chair must have the confidence and trust of the president and Congress and bank officers, foreign officials, business leaders, and the general public. Citizens must have confidence that the...
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...consumer purchases of products decline and an MNC’s sales in that country may be lower than expected … results in reduction in cash flows and valuation - international political risk … foreign government may increase taxes or impose barriers, consumers may boycott if friction between countries - exchange rate risk … foreign currencies to be received suddenly weaken against dollar, MNC will receive lower cash flows, cash outflows in foreign currencies are exposed to movements but in opposite direction Using the valuation (model) of an MNC, illustrate in detail the impact of these key exposures on an MNC’s value. Make sure to explain all your notation and assumptions. - cost of capital is influenced by the return required by its investors … if there is suddenly more uncertainty surrounding the cash flows, investors may only be willing to invest in the MNC if they can expect to receive a higher rate of return - consequently, higher level of uncertainty increases the return on investment required by investors and the MNC valuation decreases 2. What are the theories that explain why firms become motivated to expand their business internationally? Discuss each. p. 6-8 - comparative advantage … specialization by countries can increase production efficiency - imperfect markets … factors of production are immobile, costs and restrictions related to transfer - product cycle … as firm matures, it may recognize additional opportunities outside home country Explain...
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...LECTURE: TRAN LINH DANG STUDENTS OF TC201DE01-0100 1. Phan Nguyễn Ngọc Xuân Mỹ 101537 2. Vũ Thị Hường 101574 3. Trương Linh Trang 101579 4. Nguyễn Đỗ Thiên Trang 093304 Note for faculty: Date: ___/___/___ For the writer: (Signature & full name) 2012 – 2013 CONTENTS CONTENTS i INTRODUCTION ii I. Exchange rates 1 I 1. Exchange rates 1 I 2. Exchange rate regimes 2 I 3. Roles of exchange rates 3 II. Compare and contrast between the value of VND and the others of ASEAN 5 II 1. The exchange rates in Vietnam from 2008 to 2010 6 II 2. The exchange rates in Vietnam in 2011 8 III. Impacts on exchange rates 10 III 1. Balance of Trade 10 III 2. Balance of Payments 11 III 3. Monetary Policy 12 III 4. Differentials in Inflation 12 III 5. Differentials in Interest Rates 12 III 6. Public Debt 12 III 7. Speculation 13 III 8. Employment Outlook 13 III 9. Political Stability and Economic Performance 13 IV. Adjusted policies of Vietnamese government on exchange rates 14 Recommendation a REFERENCES e INTRODUCTION Since Vietnam began to implement the open door policies and integrate into the world economy, Vietnamese trade has jumped by a so large amount, especially after...
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...Table of Contents Introduction 2 Factors affecting exchange rate 4 Is an appreciation good or bad? 8 Reasons for Currency Appreciation in Pakistan 8 Impact of Pak rupee appreciation on Economy of Pakistan 9 Impact on Sectors 13 Conclusion/ Recommendations 14 References 15 Introduction Exchange rate can be defined as rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another (such as for the purposes of travel to another country), or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates,inflation, and the state of politics and the economy in each country also called rate of exchange or foreign exchange rate or currency exchange rate. An increase in the value of one currency in terms of another. Currencies appreciate against each other for various reasons, including capital inflows and the state of a country's current account. Typically a forex trader trades a currency pair in the hopes of currency appreciation of the base currency against the counter currency. The dollar has depreciated significantly against the rupee. As this has been a highly noticeable and largely unexpected event, it has raised a plethora of questions in the minds of citizens, and conspiracy theories have done the rounds. Yet dollar depreciation against the rupee is not as mysterious...
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...Channels of the monetary transmission mechanism The interest rate pass-through from the key policy interest rate via money market interest rates to the banks’ borrowing and lending interest rates, is an important stage of monetary transmission since it investigates the way the central bank influences interest rates in the economy, in particular when banks have a dominant role in the financial system, as in the case of Macedonia. The monetary policy has the potential to influence output and prices. Output is affected in the short to medium run, because of nominal price and wage rigidity. For instance, if the central bank increase the supply of money, that will lead to increased demand for goods and services, increased demand for labour force, increased production, and on the other side if the employees ask for higher wages, when companies will realize that demand is only nominally increased, the curve will decrease, meaning that on short-term the central bank may influence due to the rigidity of wages and prices. Nevertheless, the output effects will disappear in the long run as it is expected that prices will adjust slowly, but certainly. Thus, in the long run monetary policy determines the prices of goods and services. Understanding the mechanisms through which the monetary signals are transmitted within the economy is not an easy task. The difficulty arises not only because of numerous transmission channels, but also because of their different relative importance in various...
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...1.1 Introduction: Rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another currency or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates, inflation, and the state of politics and the economy in each country it also called rate of exchange or foreign exchange rate or currency exchange rate. 1.2 Objective of the Report: The primary objective of this report is to know the over functions of government in foreign exchange market. But the objective behind this study is something broader. Objectives of the study are summarized in the following manner: • To describe the exchange rate systems used by various government. • To explain how government can use direct and indirect intervention influence exchange rates. • To study existing government control over exchange rate system. • To know how government can affect economic conditions. • To have some theoretical exposures that will be helpful for our future career. 1.3 Methodology: For preparing this report, we have undergone group discussion, collected data from internet. We also studied different circulars and reference books on this topic. We hope these criteria will be enough to find out different picture of government influence on exchange rate system. 1.4 Limitations of the Study: 1. The time, 1(One) week...
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...6 Factors That Influence Exchange Rates Изображение Стр. 1 Home Videos Dictionary Acronyms Bonds Buzzwords FOREX Mutual Funds Options & Futures Retirement Stocks Taxes Tech Analysis Trading Articles Stock Analysis Special Features Investing Basics Stocks Mutual Funds FOREX ETFs Active Trading Bonds Financial Theory Fundamental Analysis Options & Futures Personal Finance Real Estate & Mortgages Retirement FAQs View All Tutorials Special Features Beginners Experienced Investors Active Traders Retirement Exam Prep Quizzes CFA Level I CFA Level II CFA Level III Series 6 Series 7 Series 26 Series 63 Series 65 Series 66 CSC More Exams... FXtrader Home Trade Now Challenges Login Simulator Home My Portfolio Trade Stock Games Resources http://www.investopedia.com/articles/basics/04/050704.asp 05.03.2011 1:09:20 6 Factors That Influence Exchange Rates Login Financial Edge Free Tools Stock Ideas Free Annual Reports Guides and Books Learn About Futures Mortgage Offers Financial Calculators Стр. 2 .omestopediaи е Страница, размещенная в публичном Интернет, запрашивает данные из вашей частной локальной сети. По соображениям безопасности автоматический доступ будет заблокирован, но вы можете его разрешить. Продолжить Всегда продолжать при запросе данных с данного сервера в мою закрытую локальную сеть enter keywords enter symbol Get Quote Предупреждени е Страница, размещенная в публичном Интернет, запрашивает данные из вашей частной локальной сети. По соображениям...
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...ECON101 ESSAY -Foreign exchange -AE questions -Demand pull/Cost push Fiscal or Monitory policy - Money market (Demand/Supply) (Definition of Economics) Scarcity refers to the situation where resources (like labor and time) are limited but the wants are unlimited. (GDP) - GDP DEFINED GDP or gross domestic product is the market value of all final goods and services produced in a country in a given time period. - Final Goods and Services GDP is the value of the final goods and services produced. A final good (or service) is an item bought by its final user during a specified time period. Real GDP per capita = Real GDP/Population (Real GDP Fluctuations ) A business cycle is a periodic but irregular up-and-down movement of total production and other measures of economic activity. Every cycle has two phases: 1 Expansion 2 Recession and two turning points: 1 Peak 2 Trough (List 4) Factors not in GDP that influence the standard of living are * Household production * Underground economic activity * Health and life expectancy * Leisure time * Environmental quality * Political freedom and social justice (Fixed Prices and Expenditure Plans) Disposable income is either spent on consumption goods and services, C, or saved, S. That is, Yd = C + S (MARGINAL PROPENSITY TO CONSUME) It is calculated as the change in consumption expenditure, △C, divided by the change in disposable income...
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...The Foreign Exchange Market Before the times of the foreign exchange market, the world depended on the gold standard to determine the value of goods and services. This paper will describe in more detail the gold standard, the positive and negative aspects of using the gold standard and in addition the paper will summarize the major functions of the world’s major foreign exchange markets. The gold standard was a monetary system that many countries used in order to determine the value of domestic currencies in relation to a specific amount of gold. The value of money, bank deposit and notes were transformed into gold at the specific amount. Britain was the first country to adopt the gold standard in 1816, followed by the United States. From 1834 until 1933 the specified price of gold in the United States was $20.67 per ounce (Bordo, 2002). However, in 1933 U.S. President Franklin D. Roosevelt put an end to the gold standard when he prohibited the possession of gold by any persons except for the purposes of owning or manufacturing jewelry (Moffatt, 2008). This was the beginning of the Bretton Woods System. Under the Bretton Woods System, countries agreed to settle their international balances by converting deficits into U.S. dollars at a flat exchange rate of $35 per ounce (Bordo, 2002). This monetary system only lasted until 1971 when President Richard Nixon completely ended the trading of gold (Moffatt, 2008). Since that time the gold standard has not been used by any major...
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...Policy Group #4 Aakash Ahuja 7976 Ibad Rehman 7844 Komal Niazi 8247 Faisal Pervez 7576 Rabail Channa 7017 Monetary Policy: An Overview & Introduction Monetary policy refers to any action taken by the state bank of any country, on behalf of the Government, to try to influence either the supply of money or the price of money, as given by the rate of interest. Instruments of Monetary Policy. The instruments are what the Bank can directly manipulate in an effort to achieve its goals. The main instruments used are: 1) the purchase and sale of financial assets (mainly government securities) in the open-market, so called “open market operations” which directly affect bank reserves: 2) The rate at which it will offer credit to the banking system (interest rate). How Does Monetary Policy Work? 1. Open Market Operations Open market operations refer to the borrowing and repayment of Government debt to the general public. This is undertaken by the state bank to influence the money supply. The state bank can borrow money from the public by selling them securities, bonds and treasury bills. These bills and bonds last for some period of time and therefore that money is out of the market for that time period. 2. Special Deposits The state bank can reduce the money supply by calling for special deposits. The state bank orders commercial banks to deposit money with it for a certain period of time. Calling in special deposits automatically reduces the amount...
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