Questions tagged [foreign-exchange]
The foreign-exchange tag has no usage guidance.
48
questions
0
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1answer
17 views
Relationship between government expenditure and exchange rate?
I've read an increase in government expenditure can lead to or increase the chances of currency crisis but shouldn't it lead to the opposite?
Fiscal deficit ----> Govt will undertake borrowings ---> ...
0
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0answers
9 views
With exchange rate parity, how do rates of return equalize?
Rate of return is equal to interest rate plus appreciation, is that right?
If so, say you have a deposit in Canada and you find that the expected rate of return is greater in Australia. The demand for ...
0
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0answers
11 views
How does China control tax havens / finance flight differently?
It is said that china tries to prevent its money leaving overseas, for example yuan holding officials can't expatriate millions abroad or smuggle diamonds? How is that possible and efficient?
0
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1answer
30 views
Do local taxes help in paying back foreign debts?
I always wonder if increasing local taxes could help countries in paying off the foreign debts?
I think taxes generate income in local currency. While foreign debts (from IMF, World Bank etc.) are to ...
0
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2answers
52 views
Why is oil being traded in U.S. dollars?
I am trying to understand the concept of money,forex, depreciation of currency,devaluing,...(just the basic stuff). While I was reading about why oil is being traded in U.S. dollars, on the internet, ...
0
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1answer
16 views
How does exchange rate change with respect to interests?
If the central bank raises intereat rates, isn't the money supply now less and the exchange rate is greater? I have run into opposite statements and dont know how to approach this problem.
Thanks in ...
-1
votes
1answer
38 views
Meaning of Exchange rate
Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?
0
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0answers
15 views
Forward exchange rates and inflation
Looking at forward rates, the exchange rate for the currency with the higher interest rate gets worse over time. This makes sense or else there would be an arbitrage opportunity to borrow in the low ...
0
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1answer
18 views
Relation between foreign currency reserve and exchange rate and others
What is the relationship between foreign currency reserve(USD) of a country with it's exchange rate (against USD), and also with export and import strength ?
And if it's too complicated to explain, ...
0
votes
1answer
62 views
How does interest rate impact exchange rate?
When I’m using the forward exchange rate formula based on non-arbitrage theory, it tells me that a positive interest rate spread (i_domestic > i_foreign)would cause the forward exchange rate(units of ...
1
vote
2answers
64 views
How is India able to increase its foreign exchange reserves despite historically running a trade deficit?
Balance of Trade: https://tradingeconomics.com/india/balance-of-trade
Foreign Exchange Reserves: https://tradingeconomics.com/india/foreign-exchange-reserves
Remittances do help (avg. \$4B/mo) but ...
1
vote
1answer
29 views
Monetary Approach to a depreciating currency
I am currently doing some research on the monetary approach to the effects of currency fluctuations on trade balance. It's been a while since I took an int econ class back in the undergrad, so I hope ...
1
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0answers
24 views
In Korea, violations of foreign exchange controls were punished with the death penalty?
According to Chang Ha-Joon (2007), in (South) Korea,
violation of foreign exchange controls could be punished with the death penalty.
Is this true? What was/were the exact law(s)? Did anyone ...
0
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0answers
14 views
Exchange rate target zone 45 degree line in the free float case - Krugman Target Zones
As far as i understand in the Krugman target zone model the following equation describes the behaviour of the exchange rate within and outside a target zone $s_t = f_t + \alpha E_t(ds_t/dt)$. But if ...
2
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0answers
78 views
Effect of Import Tariff on Supply of Currency on Foreign Exchange Market
I'm struggling with this question below for my macroeconomics course.
If Argentina were to impose a tariff on its imports, how will the supply of Argentina's currency and its exchange rate be ...
-1
votes
1answer
193 views
What negative effects would result from globally fixing currency exchange rates?
Assuming one had the power to enact such a wide-ranging change, what would the negative effects of fixing the exchange rates between all currencies at the current rates, or the mean of the last week/...
1
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0answers
29 views
What is the impact of money “sent” to another country?
I've been thinking about this a lot and I am not sure I have understood correctly. I was thinking about, for example, migrant workers who send a portion of their income back home, or wealthy ...
0
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1answer
41 views
Who looses Forex if someone gains?
My understanding of forex exchange is that when there are two currencies cur1 and cur2, they are balanced in the world with a ...
1
vote
1answer
28 views
Why is it a problem if a considerable amount of currency is hoarded by the enemy of the issuing government?
During WWII and after Pearl Harbor, the United States issued the Hawaii overprint notes because they feared the possibility that if the Japanese captured Hawaii they would also control a considerable ...
1
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0answers
27 views
The Crisis of Argentina
newbie here.
Q1 - What needs to be done by the Argentinian government for their currency to regain back its strength?
Q2 - Why has the Argentine Peso depreciated against the U.S Dollar for more than ...
1
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0answers
18 views
Exposure of two companies in a transaction involving an FX option
An American company $A$ has sold a manufactured product to a German company $B$, and they agree for the payment of 100,000 EUR in 1 year.
What type of exposure does $B$ have?
What type of exposure ...
4
votes
2answers
416 views
Can't a country grow its GDP without foreign investment?
Whenever various developing countries around the world talk about growing their economies, they talk about facilitating foreign investments and they put so much emphasis on it as if a country's ...
3
votes
1answer
77 views
How does imposing 100 percent cash margin requirement on imports help to stabilize foreign exchange reserves of a country?
My country is facing a critical depreciation of its currency's exchange rate and the central bank has introduced a 100 percent cash margin requirement on a selected set of imports.
My main problem is ...
1
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0answers
89 views
How would a “one-way” fixed exchange rate backed by destroying foreign currency work?
Note: This question may seem really pointless, but it's actually in the context of a cryptocurrency idea I am developing, but I posed it this way as the question is not really about cryptocurrencies ...
5
votes
1answer
126 views
Is it true that the U.S has to run a chronic trade deficit with the rest of the world as a price to pay for being the world's reserve currency?
I have heard of the argument that in order for USD to be reserve currecy, the rest of the world must own enough USD to store it as reserves. In order for the rest of the world to own enough USD, U.S ...
1
vote
2answers
60 views
How does domestic demand affect the domestic currency's value
If an economy grows, due to a tax reduction for example, how does that affect the exchange rate?
My logic would be that reduced taxes put more money into people's pockets, which they then use to buy ...
4
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0answers
41 views
Mechanics of Sterilized Intervention?
I'm looking to see if someone can help improve my understanding of sterilized intervention in FX markets.
My intuition/understanding is:
Assume that the domestic currency is depreciating, perhaps ...
3
votes
2answers
520 views
Abolishing all tariffs without reciprocity
Is a policy of abolishing tariffs without expecting other countries do so a sustainable economic policy? What are the arguments for or against it?
Fear of imports is very common among people. Money ...
0
votes
3answers
126 views
Theoretical market capitalisation of a crypto currency?
Here’s the context. I want to know what the theoretical market capitalisation (say eg $US / Bitcoin times Q the number of coins - it doesn’t have to be Bitcoin) of a crypto currency? Assume that the ...
2
votes
2answers
3k views
Who determines the exchange rate and how?
I have almost no knowledge about economics. However, a question always comes in my mind. How exchange rate really differ? I live in Bangladesh. So how, why, who changing BDT and US Dollar exchange ...
1
vote
2answers
275 views
How does Russia have so much foreign exchange reserves?
Source
Russia is under U.S. sanctions. How does Russia have so much foreign exchange reserves?
1
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1answer
98 views
Econometrics for currency valuation?
Different assets have different motivations and components for price determination. For example, an equity stock price might be considered to be include the value of underlying company, its potential ...
3
votes
1answer
163 views
Why imports increase if higher relative inflation?
I'm reviewing a previous AP Macroeconomics exam and I saw the following question:
The United States and South Korea are trading partners, and the United
States has a zero current account balance. ...
0
votes
1answer
277 views
What are the limitations that a country faces in increasing its Forex Reserve?
The Forex Reserve of a country remains in the locker of its central bank and does not earn any interest for that country. What are the measures that the central bank of a country can take to overcome ...
1
vote
1answer
805 views
Exchange rate and domestic money supply
It seems an obvious fact (not explained by authors but stated) that when a Central Bank purchases foreign currency (to stabilise its own), the domestic money supply goes up.
It seems to me that the ...
1
vote
3answers
525 views
How is the rest of the world making the US an interest free loan by holding US currency?
In the book "Macroeconomics" by Olivier Blanchard & David R. Johnson, the following appears:
In yet other countries, people who have emigrated to the United
States bring home U.S. dollar ...
2
votes
2answers
79 views
PPP / currency evaluation
An economics book has the following example:
In the USA, a Big Mac sells for 1 USD, while in Germany it sells for 3 EUR.
The "fair" FX relation would therefore be 1 USD = 3 EUR. At the FX market, ...
2
votes
1answer
1k views
Misleading vertical axis in foreign exchange graphs analyses?
The market for a currency typically has the y axis labelled as (currency1/currency2) where currency1 is the currency in which the demand and supply is for. If this is the case, wouldn't it mean that a ...
0
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2answers
70 views
Why would increased inflation increase the value of the dollar and bond yields?
I was reading this Fortune article (http://fortune.com/2016/11/14/donald-trump-victory-dollar-inflation/) and came across this confusing quote:
"'Clearly the market has settled on a 'buy dollar' ...
0
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0answers
91 views
Do changes in the interest rates affect the supply of currency?
I understand how changes in interest rates affect the demand for currency (i.e. foreign exchange), but was wondering whether there is also an effect on its supply. I am hypothesising the following: ...
1
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1answer
63 views
What physically happens when foreign currency reserves change?
Assume that the United States decided to hold more yuan in the federal reserve. Which processes does that involve? I assume there is some sort of electronic exchange between the two central banks ...
1
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0answers
86 views
Evaluating the return of a trading strategy on forex markets
Which measure should I use to evaluate the returns generated with a trading strategy based on announcements of macro-economic news on forex markets.
I thought about the Sharpe-ratio, however I do not ...
1
vote
1answer
832 views
How should I adjust data for both inflation and foreign exchange rate?
I’m not sure if this is typically done, but suppose my data point is in 2013 JPY and I want to express in 2016 USD. Do I apply CPI to express data in 2016 JPY, and then apply exchange rate to 2016 USD?...
2
votes
0answers
44 views
Reasons and mechanisms of Deutsch Mark revaluation in 1968
In November 1968, large inflows of foreign currency into the Bundesbank prompted Germany to enact a "pseudo - revaluation" with a special tax on exports and tax allowance on imports.
Source: German ...
1
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0answers
47 views
What's the equation of currency fluctuation?
Preamble:
Today the rate of EUR is 82.09 in BDT ( Bangladeshi Currency) and two hours later it's 82.50 ( I hope, it's increasing). But why does this fluctuation just keeps happening? Looks like the ...
1
vote
0answers
70 views
How does foreign exchange settlement work?
How does the settlement of trades in foreign exchange work?
For example, if I am a large company with money in dollars and I buy another currency like Deutschmarks with my dollars, how does the money ...
4
votes
1answer
338 views
How does Egypt prevent people from arbitraging their currency?
Apparently Egypt uses a fixed exchange rate so there is a substantial difference between the government rate for the Egyptian pound and the price on the street. What prevents someone from just buying ...
0
votes
1answer
99 views
Currency triplets - arbitrage opportunity?
I have three currency pairs - USDEUR - 0.88, USDINR - 67.13 and EURINR - 75.88 , so simple math tells me that EURINR should be USDINR/USDEUR = 76.28 ...this is a fairly significant deviation from an ...
