Exchange Rates An exchange rate is simply the PRICE at which ONE CURRENCY can be TRADED FOR ANOTHER. Exchange rates are determined by DEMAND and SUPPLY.

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Presentation transcript:

Exchange Rates An exchange rate is simply the PRICE at which ONE CURRENCY can be TRADED FOR ANOTHER. Exchange rates are determined by DEMAND and SUPPLY

British citizens travelling to America Will need to purchase US dollars In order to buy dollars they will need to sell pounds in exchange

Effects The effect of selling pounds and buying dollars is to make the POUND CHEAPER compared to dollars, THE VALUE OF THE POUND HAS FALLEN It has DEPRECIATED in value

Effects If people from the USA want to BUY POUNDS The value of the pound will INCREASE IT will APPRECIATE in value

Examples If the exchange rate is £1 = $2 Then a British cricket ball that costs £5 will have to sell in the USA for $10 A baseball that cost $6 in the USA can be sold for £3 in the UK

Examples If the value of the pound RISES so that £1 = $3 The same cricket ball will sell for $15

Strong/weak pound Strong pound is good for UK travellers going overseas Not good for overseas visitors to the UK Weak pound is good for overseas visitors to the UK Not good for UK travellers going overseas

China What is the current exchange rate between Thai ฿ & Chinese Yuan? Why does China control the exchange rate? How does China control the exchange rate?

How much Baht would buy you: 1 USD 1GBP 1 EU 1 YUAN