Exchange Rates
The short term factor that affects exchange rates.
What are Financial Flows?
This term describes the price of one currency in terms of another.
What is an exchange rate?
The cause of the dollar to fluctuate in value on a daily basis.
What are flow of funds between markets, supply and demand?
The organization that helps countries settle trade disputes and ensures they follow agreed-upon rules for fair trade.
What is the World Trade Organization?
The long term factor that affects the exchange rates
What is trade?
When the U.S. dollar strengthens, this happens to U.S. exports.
What is they become more expensive?
The 3 main factors affecting the expected rate of return on assets.
What are Interest Rates, Inflation, Risk?
The type of trade barriers applied only to certain goods, industries, or trading partners
What is selective trade barriers?
The country used as an example of fixed exchange rates within the presentation.
What is China?
A stronger dollar helps reduce inflation by making these cheaper for U.S. consumers and businesses.
What are imports?
Actions investors do when they are concerned over sovereign debt.
What is move funds out of Europe to lower value of Euro?
The top manufacturer in the world in terms of total value of goods produced.
What is China?
This financial strategy helps multinational companies lock in favorable exchange rates to reduce currency risk.
What is hedging?
Microsoft’s €100 million profit in Europe repatriates to this amount when $1 = €0.80.
What is $125 million?
This primarily affects the direction of financial flows.
What is the expected relative risk-adjusted rate of return on assets?
The percentage amount that the US manufacturing value rose from 1997 to 2014.
What is 38%?
How changes in interest rates influence the demand for a currency in the foreign exchange market
What are higher interest rates attract foreign capital and strengthen the currency, while lower interest rates can drive capital outflows and weaken the currency?
This African country removed 12 zeros from its currency in 2009 to combat hyperinflation, demonstrating that currency value alone doesn’t affect purchasing power.
What is Zimbabwe?
The ways financial flows and international trade help determine the value of the dollar or any currency.
What are factors like market demands for Currency, trade deficit, trade surplus?
Definition of trade deficit.
What is a negative balance of trade, when a country imports more goods and services than it exports?