Friday, May 19, 2017

Mechanics of Foreign Exchange

The buying and selling of currency
Any transaction that occurs in the balance of payments necessitates foreign exchange
Exchange rate is determined in the foreign exchange
Exchange rate is the price of currency
Exchange rate are a function of the supply and demand for currency

  • increase in supply, decrease exchange rate
  • increase in demand, increase exchange
Appreciate and depreciation

  • Appreciation of currency occurs when the exchange rate of that currency increase
  • Depreciation of a currency occurs when the exchange rate of that currency decreases
Exchange rate Determinants

  • Consumers tastes
  • Relative income
  • Relative price level
  • Speculation

1 comment:

  1. Jean, Jeen, Jene, John. I like how your blog is presented. It is quite calm and soothing. The information is sufficient but a quandary I have how speculation, relative income, and relative price level affects the exchange rate? How exactly is the e affected?

    ReplyDelete