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19 votes
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How is it possible that all currency exchange rates are fixed w.r.t. to each other?

International currency markets are highly liquid, with near-instant transfer of knowledge between trading centres. This means that any arbitrage opportunities tend to get resolved within seconds. To ...
410 gone's user avatar
  • 8,168
8 votes

Who determines the exchange rate and how?

Technically you are changing the BDT/USD exchange rate, or at least you're changing one of the reasons. If supply/demand changes, the value of a particular currency is going to change as well. But ...
caverac's user avatar
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8 votes
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Why does Russian ruble conversion rate to USD remains constant at 1 to 0.01?

Currently there are quite a few restrictions on US to Russia bank operations. The answer is that Google Finance gets its data for the exchange rates from a specific service, Morningstar, who are ...
Giskard's user avatar
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8 votes
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What are the reasons for Russian Ruble to strengthen in the past few days?

It’s likely combination of several factors. Some of it it’s because Russia has instituted capital controls (see Reuters). That means that Russians are limited or in some cases even prevented from ...
1muflon1's user avatar
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7 votes
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Does Russian Ruble strengthening mean the sanctions did not hurt Russian economy?

No, it does not mean that. Currency value just reflects supply and demand for the currency. It is not a measure of how economy is performing. There can sometimes be some correlation between exchange ...
1muflon1's user avatar
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6 votes
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How can the HKMA peg the Hong Kong dollar at 7.8 HKD/USD for so long?

To maintain the currency peg, the Hong Kong Monetary Authority (HKMA) has to buy HKD and sell USD when the currency comes under depreciation pressure and sell HKD and buy USD when the currency comes ...
M3RS's user avatar
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6 votes

Why is the US rating AAAA+ after they printed trillions of dollars out of thin air, and bailed out the US stock market?

First of all let's get our facts straight as it is not proper to argue based on incorrect premises. The maximum ranking possible, used by conventional internationally respected debt ranking agencies, ...
1muflon1's user avatar
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5 votes
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Which currency is preferred when countries with different currencies purchase imports/sell exports?

There isn't a typical answer. The vendor may want paying in whatever currency represents the highest proportion of their costs, as this reduces their currency risk. But there may also be ...
410 gone's user avatar
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4 votes
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Do import tariffs tend to increase a country's exchange rate (if so, why)?

Suppose that there is no 45 percent tariff and the market is in some kind of equilibrium. That is the demand for yuans equals the supply of yuans at the current exchange rate. Now assume Trump does ...
Giskard's user avatar
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4 votes

Theoretical market capitalisation of a crypto currency?

As there is no practical limit on the number of cryptocurrencies that can be created, and as no one crpytocurrency has a unique advantage over any other, and as no cryptocurrencies are legal tender ...
410 gone's user avatar
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4 votes
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Demand Curve of Foreign Exchange

At market both price (in this case exchange rate) and quantity are endogenous ('dependent') variables. You are confusing two completely distinct phenomena. Movement along demand curve and shifts in ...
1muflon1's user avatar
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4 votes

What does the price of bitcoin per ounce of gold tell us?

It's BTC per Oz gold which shows how many btc you need to pay for 1oz. To compute this, you need to know the price (and both are quoted in USD). It still tells you a lot about the purchasing power. A ...
Alex's user avatar
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3 votes
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Is there a difference between buying a currency and selling the currency to be converted to?

Buy and sell rates are different because the currency vendor wants to make a profit and is also taking some risk with the exchange. It is possible that she cannot unload all the CADs they buy from you ...
Giskard's user avatar
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3 votes

What does long-run level mean for exchange rate

The long-run in economics is a technical term. It means, roughly "without any short-run constraints". What are short-run constraints? Well they're fixed costs like any contracts you've signed (like, ...
Antecedent's user avatar
3 votes
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Converting a GDP series to constant international dollars

You are correct. That is the right way to go. Take your starting nominal GDP series in local currency units (e.g. Euros), and use the PPP rates to transform local currency units into nominal US ...
luchonacho's user avatar
  • 8,591
3 votes

Should Finland leave the eurozone?

In the present legal environment it's not possible for a country to exit just the Eurozone voluntarily, by itself. The only sure way is the complicated scenario in which a country would leave the EU ...
got trolled too much this week's user avatar
3 votes

What are the differences between the older gold standard and the current fiat money standard?

A gold standard is when a country tries to maintain a fixed rate of exchange between their currency and the value of gold. So, for example, the United States attempted to maintain an exchange rate of ...
Lassie Fair's user avatar
  • 1,728
3 votes

What is the reason of devaluation in Turkish Lira?

The recent shift was likely two major interrelated reasons: First, there was already relatively high uncertainty regarding the future viability and value of the currency (as @zeta-band noted, they're ...
AndrewC's user avatar
  • 1,380
3 votes

What negative effects would result from globally fixing currency exchange rates?

Is the only benefit to fluctuating currency rates that it means some people make a lot of money by trading currencies, with zero appreciable benefit to humanity at large ? No. The main benefit of ...
got trolled too much this week's user avatar
3 votes
Accepted

Facebook's Libra - Why would it vary in value

It will vary in value because trust in it will fluctuate just as trust in facebook fluctuates. There will also be volatility as trust varies in confidence in the payment system; its integrity and ...
410 gone's user avatar
  • 8,168
3 votes

Is the mid-market currency exchange rate something real? Or are bid and ask rates the real rates?

Indeed the bid and ask spread is very real. The liquidity taker cannot buy and sell at the same price. The market maker extracts a "liquidity premium" for providing liquidity. When you buy with a ...
Michael's user avatar
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3 votes
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How do transactions in different currencies work?

Let me explain you in the most simple way how it work behind the scenes... Credit card issuers and payment networks charge cardholders an international transaction fee if the purchase has been made ...
Nora Kacenova's user avatar
3 votes

If the BOP is always equal to 0 then why would a trade imbalance cause currencies to fluctuate?

Ignoring net errors and omissions and the official reserve account, it is indeed just the current account and capital account and the BoP always balances. However, under floating FX rates, the ...
AKdemy's user avatar
  • 4,122
3 votes

What does the price of bitcoin per ounce of gold tell us?

I am not sure what the chart intends to show. In any case, the series in question is how many BTC you need to pay for one ounce of gold. The scale is logarithmic by the way. If you overlay the inverse ...
AKdemy's user avatar
  • 4,122
3 votes
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Why doesn't Ukrainian currency suffer from the war?

You can read the exact details on the website of the National Bank of Ukraine - download the IMF document. It has little to do with so called repatriation, as suggested in a comment. In fact, people ...
AKdemy's user avatar
  • 4,122
3 votes

Where does the euro/dollar rate data prior to 2002 come from?

I could not find a source for the google exchange rate, but my best guess is that it is based on ECU (European Currency Unit). ECU was predecessor of euro set up in 1979. When Euro was set up it ...
1muflon1's user avatar
  • 57k
3 votes
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How can the exchange rate be virtually constant with major inflation rate difference and a widening trade deficit?

You are right, all your points suggest that there is downward pressure on RON (it should depreciate). Also, (un)covered interest rate parity would suggest that RON should depreciate! The UIP equation ...
AKdemy's user avatar
  • 4,122
2 votes

How does a bank convert one currency to another?

Yes, a reserve is needed to ensure the integrity of the money issued (as always). On the international foreign exchange market, many millions are traded at a time. Otherwise, with smaller amounts of ...
ahorn's user avatar
  • 1,230
2 votes
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Venezuelan black market exchange

The official rate is about 10, but the black market rate is about 1000. Also, yes, apparently the real exchange rate at the 1000 rate is pretty low, in the sense that one dollar buys a lot of local ...
Fix.B.'s user avatar
  • 2,668
2 votes

What is the relationship between inflation and imports/exports?

As requested in comments: It is a matter of which other factors are being held constant. If the relative-inflation-adjusted exchange rate (i.e. the real rate) stays constant, there may be no supply ...
Henry's user avatar
  • 4,765

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