Questions tagged [foreign-exchange]

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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 ...
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189 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 ...
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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 ...
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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. ...
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30 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. ...
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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 ...
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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 ...
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21 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 ...
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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 ...
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90 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 ...
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62 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 ...
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78 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 ...
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14 views

Are these two different cases when it comes to Forex Reserves?

In a forex reserve, what is the difference between "Buying US Dollars to pile up reserves" and "Using FPIs, remittances or exports to build up reserves" ? How differently do they ...
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11 views

Determining the effect of fiscal policy on foreign exchange market

I'm in AP (high school) Macroeconomics and I confirm if my thinking is right. Suppose the US and Taiwan are trading, and the US government decides to decrease taxes. I think this should have two ...
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17 views

Equities-dollar correlation

Equities-dollar correlation was mostly positive in the 2000s and switched to negative since the GFC. Are there any structural drivers explaining this change in correlation?
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2answers
319 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 ...
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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 ...
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37 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 ...
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95 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: ...
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1answer
128 views

Meaning of Exchange rate

Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?