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picture1_Foreign Exchange Market Ppt 73602 | Ch14 Salvatore Ppp


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File: Foreign Exchange Market Ppt 73602 | Ch14 Salvatore Ppp
learning goals understand the meaning and functions of the foreign exchange market know what the spot forward cross and effective exchange rates are understand the meaning of foreign exchange risks ...

icon picture PPTX Filetype Power Point PPTX | Posted on 01 Sep 2022 | 3 years ago
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        Learning Goals:
        Understand the meaning and functions of the 
          foreign exchange market
        Know what the spot, forward, cross, and effective 
          exchange rates are
        Understand the meaning of foreign exchange 
          risks, hedging, speculation, and interest arbitrage
 Salvatore: International Economics, 11th Edition  © 2013 John Wiley & Sons, Inc.
        Introduction
       Foreign Exchange Market
            Where individuals, firms and banks buy and 
             sell foreign currencies or foreign exchange.
  Salvatore: International Economics, 11th Edition  © 2013 John Wiley & Sons, Inc.
         Functions of the Foreign Exchange Markets
        1. Transfer purchasing power from one nation and 
           currency to another.
             Demand for currency arises when:
                 Tourists visit another country
                 Domestic firm wants to import from other countries
                 Individual wants to invest abroad
             Supply of currency arises from:
                 Foreign tourist expenditures
                 Export earnings
                 Receiving foreign investments
  Salvatore: International Economics, 11th Edition  © 2013 John Wiley & Sons, Inc.
        Functions of the Foreign Exchange Markets
        2. Provide credit for foreign transactions
            Credit is needed when goods are in transit, and to 
              allow the buyer time to resell the goods to make 
              the payment.
        3. Provide the facilities for hedging and speculation.
            About 90% of foreign exchange trading reflects 
              purely financial transactions, and only about 10% 
              trade financing.
  Salvatore: International Economics, 11th Edition  © 2013 John Wiley & Sons, Inc.
         Functions of the Foreign Exchange Markets
         Participants
              Those needing currency to fund transactions
                  Tourists, importers, exporters, investors, etc.
              Commercial banks
                  Serve as the clearinghouses for currency exchange
              Foreign exchange brokers
                  Clearinghouse for surpluses and shortages between 
                   the commercial banks
              Central banks
                  Buyer or seller of last resort in the foreign exchange 
                   market
   Salvatore: International Economics, 11th Edition  © 2013 John Wiley & Sons, Inc.
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...Learning goals understand the meaning and functions of foreign exchange market know what spot forward cross effective rates are risks hedging speculation interest arbitrage salvatore international economics th edition john wiley sons inc introduction where individuals firms banks buy sell currencies or markets transfer purchasing power from one nation currency to another demand for arises when tourists visit country domestic firm wants import other countries individual invest abroad supply tourist expenditures export earnings receiving investments provide credit transactions is needed goods in transit allow buyer time resell make payment facilities about trading reflects purely financial only trade financing participants those needing fund importers exporters investors etc commercial serve as clearinghouses brokers clearinghouse surpluses shortages between central seller last resort...

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