Questions tagged [foreign-exchange]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
0 votes
0 answers
72 views

Why did the Iranian Rial peak suddenly on 1 August 2014?

Search Iranian Rial and click on Max above the chart. Iranian Rial to Pound Sterling: Why did the Iranian Rial peak suddenly on 1 August 2014?
user avatar
0 votes
0 answers
10 views

Rigid peg and forex market

If a country's exchange rate is pegged rigidly (for example a currency board), can it continue to trade on forex market? If so, can the rate be different than the peg? If so, is it not a violation of ...
user avatar
0 votes
0 answers
10 views

Will increase in rGDP, increase or decrease deficit and currency?

Hello, I have a question about part (c) of this question. Text From Image: Due to expansionary monetary policy, the AD and rGDP will rise. Suppose country has current account deficit. (i) Due to ...
user avatar
1 vote
0 answers
13 views

How does US inflation impact dollarized nations?

For instance, would a high inflation rate on the US have any impact on countries that use the US dollar as their only legal tender, eg Ecuador or El Salvador? I often hear that high US inflation will ...
user avatar
1 vote
1 answer
60 views

Why doesn't Russia buy USD to pay its external debt and avoid default?

(I apologize beforehand for this extremely clueless question! I have searched for the answer for a long time without success.) Credit rating agencies have recently declared Russia to be close to ...
user avatar
  • 193
0 votes
0 answers
15 views

Will business optimism in Ghana appreciate / depreciates Ghana's currency?

Text from the image: One of Ghana’s top trading partners is India. The currency in Ghana is the cedi and the currency in India is the rupee. Which of the following is a likely consequence of an ...
user avatar
0 votes
0 answers
21 views

Which of the following is most likely to cause a currency to depreciate while discouraging capital formation?

Text in Image: Which of the following is most likely to cause a currency to depreciate while discouraging capital formation? (A) A decrease in the demand for money (B) An increase in the supply for ...
user avatar
4 votes
0 answers
46 views

What caused Russia's currency to appreciate back to pre-war levels despite sanctions and debt default? [duplicate]

Prior to its invasion of Ukraine on 24 Feb 2022, Russia's currency was trading at around 0.012 USD. Today, the Ruble is back near pre-war levels (currently 0.12 USD): I thought war, sanctions, ...
user avatar
  • 41
2 votes
2 answers
155 views

(How) does Russia benefit if Gazprombank instead of Gazprom gets to keep the euros?

I know there's an older question here, but Russia has recently clarified (after some pushback from the EU capitals) what it means by gas payments in rubles. As RT explained: “Everything will be fast, ...
user avatar
  • 3,730
1 vote
3 answers
102 views

How do USD sanctions on Russia work?

On the 28th of February 2022, the US Government banned United States persons from engaging in transactions with the Central Bank of the Russian Federation. The motive was quoted as "to prohibit ...
user avatar
0 votes
0 answers
38 views

Will the freezing of Russia's foreign exchange reserves force China to decrease its massive Western currency reserves?

China has build up a massive foreign exchange reserve (excluding gold) of 3.2 trillion USD (FRED, Nov 2021). By the end of 2014, 58% of this were held in US dollars, according China's State ...
user avatar
  • 115
0 votes
1 answer
14 views

How does falling dollar make goods cheaper for foreigners?

If the exchange rate between the dollar and euro is 1 to 1. Then a 100 million dollar Boeing jet should cost around 100 million euros. If inflation in the US is 5% (0% in Europe), then the Boeing jet ...
user avatar
0 votes
0 answers
17 views

Balance of payment and cash

Can you explain in simple terms how FX cash withdrawals are recorded in the BoP and in particular the impact on Errors and Omissions? From below report it seems when people get USD cash at ATM this ...
user avatar
0 votes
1 answer
27 views

Is net foreign exchange reserve for a country more important?

Let's say a country need 8 billion dollars for reserve. It has 10 billion dollars of foreign exchange reserve, but also with 9 billion dollars of foreign debt or even more. So the remaining net ...
user avatar
  • 103
1 vote
1 answer
40 views

Monetary sterilization’s working is wrong?

Say, there is an increase in demand for dollars (as compared to the other currency, say yen), which will put appreciation pressures on dollar. Then to counter this appreciation, we need to buy yen. ...
user avatar
  • 71
0 votes
0 answers
23 views

Nominal vs Real value of a currency

I was wondering what is usually the relationship between the nominal value, NEER, and the real value of a currency REER? And how to interpret the REER of a currency, >100 overvalued < 100 ...
user avatar
0 votes
0 answers
10 views

Current Account and FX valuation

I was reading somewhere that under normal circumstances the FX rate of current account surplus countries tends to underperform and that of current account deficit countries to outperform. Can you ...
user avatar
1 vote
0 answers
15 views

How are the rates between two currencies (fiat and cryptocurrecies) determined? [duplicate]

How are the exchange rate between two countries determined? For example how is exchange rate between the dollar and the euro established? My guess is it has to do with some form of demand/supply but I ...
user avatar
1 vote
0 answers
39 views

What are the macroeconomic options available to China for resolving the Evergrande bubble?

Partly inspired by this Noah Smith article. I was talking with a friend and we were trying to itemize what options might be available to the Chinese government to resolve the collapse of Evergrande. ...
user avatar
  • 161
1 vote
0 answers
33 views

How do currency boards maintain a 100% foreign reserve backing in the presence of fractional reserve banking?

Under a currency board system, money in circulation has to be 100% backed by foreign reserves. Suppose the domestic currency (A\$) is 100% backed by a foreign currency (B\$), with a fixed 1:1 ratio. ...
user avatar
  • 495
0 votes
2 answers
76 views

Can an appreciating currency lead to inflation?

If a currency, e.g. the rupee (INR), is appreciating against, say, the USD, it possibly means that there is a high demand for the former. India could have net exports, high remittances, increasing ...
user avatar
0 votes
1 answer
41 views

Is there a way to trade currencies several times and end up with more money than one starts with?

Conjecture: The foreign price value of a currency is not absolute. Scenario: If the euro appreciates relative to the British pound and the price of the US dollar stays the same relative to the euro, ...
user avatar
0 votes
1 answer
53 views

The impact of a devaluation of the national currency under a fixed exchange rate system

I would really be thankful if any of you could check my answer to the following question. Question: Describe, using the IS-LM-BP model, the impact of a devaluation of the national currency under a ...
user avatar
-2 votes
1 answer
75 views

How does one country peg its currency to another's? [closed]

For example, Belize has pegged its currency to the US dollar at an exchange rate of 2 Belize dollars to 1 US dollar. How does Belize do that?
user avatar
0 votes
2 answers
515 views

Why is the supply curve in the foreign-currency exchange market vertical?

In the book 'Economics' by Mankiw and Taylor the demand and supply curves on the foreign-currency exchange market are shown as follows: The supply equals the Net Capital Outflow (NCO). I would have ...
user avatar
0 votes
1 answer
26 views

Dynamics of interest rates, exchange rates and bond prices within the UIP

There are already a few questions about the workings of the UIP and the exchange rate. What I have basically taken from those discussions is that one always has to distinguish between the spot rate ...
user avatar
  • 25
1 vote
1 answer
62 views

How does foreign trade work in a planned economy?

I know that in a planned economy all economic processes are ruled by the state and that there are disadvantages such as too much bureaucracy and that sometimes deals are not always met with demand... ...
user avatar
  • 143
2 votes
1 answer
44 views

Is the forex market a form of bartering?

I had this showerthought that the forex market is pretty much currency bartering. The forex market seems to be different from commodity or stock markets in that you exchange one currency for another. ...
user avatar
  • 123
0 votes
2 answers
28 views

Since the US-China Trade Deficit grew, would the USD be valued more now compared to the RMB?

I'm curious to see how broadening or narrowing a trade deficit would affect a currency pair.
user avatar
0 votes
0 answers
29 views

Size US Capital Account

I am not able to find the size of the capital account within the balance of payments for the US. Only "net" numbers, does anyone know the size of both sides of this account? They both seam to be ...
user avatar
1 vote
2 answers
140 views

Why does an increasing demand for dollars lead to the depreciation of a currency?

I am self studying some slides of a course on monetary economics. The source of the slides is Pilbeam, chapter 11 on the mechanism of the Bretton Woods system. I don't understand the following ...
user avatar
1 vote
1 answer
30 views

Why would oil suppliers choose a lower priced contract?

The West Texas Intermediate (WTI) futures contract has ranged from \$6 to \$20 in the last 48 hours. The May Shanghai International futures contract is 205 Yuan (CNY). At 7 CNY per USD, that comes ...
user avatar
0 votes
1 answer
351 views

How do you read currency exchange rates in terms of domestic and foreign currency?

I am having some issues understanding how to read exchange rates. E is the exchange rate I read online that if we have for example E\$/€, then the base currency in this case is the dollar and the ...
user avatar
0 votes
1 answer
57 views

Relationship between government expenditure and exchange rate?

I've read an increase in government expenditure can lead to increase the chances of currency crisis but shouldn't it lead to the opposite? Fiscal deficit ----> Govt will undertake borrowings --->...
user avatar
0 votes
1 answer
33 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 ...
user avatar
1 vote
3 answers
119 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, ...
user avatar
  • 53
0 votes
1 answer
27 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 ...
user avatar
0 votes
1 answer
29 views

What prevents a government from issuing debt to finance riskier investments?

Germany has a 10Y bond yield of -0.336%. Meanwhile, Brazil has a 10Y bond yield of 6.415%. Why doesn't the German government issue bonds in order to buy Brazilian bonds? It seems a no-brainer win. ...
user avatar
  • 73
0 votes
1 answer
157 views

Meaning of Exchange rate

Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?
user avatar
  • 9
0 votes
0 answers
38 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 ...
user avatar
0 votes
1 answer
106 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, ...
user avatar
  • 101
2 votes
2 answers
146 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 ...
user avatar
1 vote
2 answers
128 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 ...
user avatar
1 vote
1 answer
45 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 ...
user avatar
  • 31
2 votes
0 answers
214 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 ...
user avatar
  • 23
-1 votes
1 answer
207 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/...
user avatar
1 vote
0 answers
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 ...
user avatar
  • 211
0 votes
1 answer
44 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 ...
user avatar
  • 103
1 vote
1 answer
38 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 ...
user avatar
1 vote
0 answers
31 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 ...
user avatar
  • 11