Questions tagged [foreign-exchange]
The foreign-exchange tag has no usage guidance.
88 questions
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How does raising the Russian interest rate defend the Ruble from devaluation?
Raising interest rates to minimize currency devaluation is being adopted in countries like Brazil and Russia:
Brazilian interest rate
Russian interest rate
How does raising the interest rate ...
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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 ...
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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 ...
user18806
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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 ...
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How does China maintain the soft peg?
As a central bank, if you want to keep your currency low you can just keep buying foreign currencies (which is selling your own currency) to satisfy all the demand for your currency and prevent ...
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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, ...
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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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Russian ruble drop in value due to low oil prices
http://www.americanactionforum.org/research/impact-falling-oil-prices-russian-financing/
Based on the above article, the author states that "For budgeting, this favors the oil exporter, because a ...
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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 ...
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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. ...
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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, ...
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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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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 ...
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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. ...
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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 ...
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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 ...
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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 ...
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(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, ...
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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 ...
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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?...
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When the country's currency is falling, does it make sense for Central Bank to intervene beyond curbing Volatity?
Consider a country who have more imports than exports. If the country's currency is falling badly with reference to the dollar (and the dollar is the main trading currency for the said country), then ...
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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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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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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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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, ...
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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. ...
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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 ...
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How did empires make wealth out of empire-colony trade?
It is commonly discussed that one way the empires of 16-18th would receive wealth from colonies is:
Get raw materials from a colony
Transport them to the empire
Make more sophisticated products out ...
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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 ...
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How do Foreign Investments by Central Banks increase the Money Supply of an Economy?
Trying to understand if "money supply" and "currency in circulation" apply only to the money within the borders of the country or does it also include its money in foreign nations ...
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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 ...
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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?
user13954
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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 ...
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Could Foreign Exchange rates fluctuate under a Gold Standard system?
I recently read an article where it said that during the gold standard, right before world war 1, 1 GBP went from equaling \$4.87 to soaring up to \$6.75 . My understanding always was that Forex rates ...
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BOP balancing to 0, use of capital and financial account
Please someone for the love of god help me. I can't find two sources on the internet that don't have conflicting or very difficult to understand information on the balance of payments.
I have various ...
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Foreign Currency Reserves: Profit / Loss from Foreign Currency Depreciation / Appreciation?
From Wikipedia article on foreign exchange reserves:
The central bank may, however, profit from a depreciation of the foreign currency or incur a loss on its appreciation.
Why does the depreciation ...
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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. ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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Balance of Payment vs. FX rate
How can a country with a Current Account deficit can have an exchange rate appreciating and viceversa a Current Account surplus and a currency depreciating?
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Current Account deficit but FX appreciating?
When the Current Account (CA) is in deficit it means there is less demand for a currency than supply so it should theoretically depreciate but sometimes this does not hold. When a country with CA ...
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During the Covid Pandemic why did the EURO appreciate against the USD even though during recessions the USD is supposed to rise as a safe-haven?
During recessions everyone flocks to USD as a safe-haven currency. However, during the pandemic quite the opposite happened in terms of EUR/USD and the Euro appreciated against the USD all the way ...
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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 ...
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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 ...
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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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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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