© 2013 Cengage Learning. All rights reserved. CHAPTER 7 GLOBAL2  PENG © J Marshall—Tribaleye Images/Alamy.

Slides:

Advertisements

Similar presentations

CHAPTER 10 The Foreign Exchange Market. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Learning Objectives Japan.

Advertisements

International Business Environments & Operations

Chapter The Foreign Exchange Market 9. McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 9-2.

Monetary Policy: Goals & Targets Chapter 18. Goals of Monetary Policy Goals 1.High Employment 2.Economic Growth 3.Price Stability 4.Interest Rate Stability.

Chapter 15 International Business Finance Key sections –Factors affecting exchange rates –Nature of exchange risk and types –How control exchange risk?

Chapter 15 International Business Finance Key sections –Factors affecting exchange rates –Nature of exchange risk and types –How control exchange risk?

Foreign Exchange Chapter 11 Copyright © 2009 South-Western, a division of Cengage Learning. All rights reserved.

Chapter 15. International Business Finance n Exchange Rate: the price of one currency in terms of another.

Chapter 33: Exchange Rates and the Balance of Payments

Learning Objectives Discuss the internationalization of business.

Exchange Rates and the Open Economy Chapter 18. Foreign Exchange Market Abbreviation: FOREX Over a trillion dollars worth are traded daily. Most trading.

Chapter 08 The International Monetary System and Financial Forces McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

July 28, 2008 Discussion Section Foreign Direct Investment; Political Economy of FDI; Foreign Exchange; International Monetary System.

International Business 9e

Chapter 10 The International Monetary and Financial Environment

© 2013 Cengage Learning. All rights reserved. CHAPTER 7 GLOBAL2  PENG © J Marshall—Tribaleye Images/Alamy.

© 2011 South-Western | Cengage Learning Foreign Exchange and International Finance Money Systems Around the World Foreign Exchange And Currency.

© SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON7-1 GOALS  Explain the role of money and currency systems in international business.  Identify factors.

Chapter Ten The Foreign Exchange Market McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

FX Market Why is the FX Market Important?  The FX market 1.is used to convert the currency of one into the currency of another 2.provides some.

Chapter 18 The International Financial System. Copyright © 2007 Pearson Addison-Wesley. All rights reserved Unsterilized Foreign Exchange Intervention.

CHAPTER 12 INTERNATIONAL MARKETS. Copyright© 2003 John Wiley and Sons, Inc. Foreign Exchange Rates Foreign trade and funds flow must involve a conversion.

Noer Azam Achsani Money Market. Courses Materials Exchange Rates and Exchange Rates System Eurocurrency and International Money Market Covered, Uncovered.

Global Business 3e Chapter 7 Dealing with Foreign Exchange

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Global Business Today 7e by Charles W.L. Hill.

Chapter 10 International Monetary System. © Prentice Hall, 2008International Business 4e Chapter Chapter Preview List the benefits of stable and.

Chapter 10 Monetary System McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. International.

Ch. 22 International Business Finance  2002, Prentice Hall, Inc.

9-1 Chapter 9 The Foreign Exchange Market. 9-2 Introduction Question: What is the foreign exchange market? Answer:  The foreign exchange market is a.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 10-1 International Business Environments and Operations, 13/e Part 4 World Financial.

Chapter 08 The International Monetary System and Financial Forces McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER 12 & 13 INTERNATIONAL EXCHANGE AND CREDIT MARKETS.

McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. History of Exchange Rate Systems Chapter 33 Appendix.

INVESTMENTS | BODIE, KANE, MARCUS Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 20 Futures, Swaps,

Foreign Currency Transactions and Hedging Foreign Exchange Risk

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 19 Exchange Rate Policy and the Central Bank.

chapter The International Monetary System McGraw-Hill/Irwin Global Business Today, 5e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. 10.

Chapter Ten The Foreign Exchange Market McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7 Learning Objectives After studying this chapter, you should be able to: 1. understand the determinants of foreign exchange rates 2. track the.

Chapter 7 Dealing with Foreign Exchange. LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. understand the determinants of foreign.

LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. understand the determinants of foreign exchange rates 2. track the evolution.

Money and Capital Markets 25 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / IrwinSlides.

Financial Forces McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter eleven.

Chapter 12 The International Financial System ©2000 South-Western College Publishing.

Chapter Nine Foreign Currency Transactions and Hedging Foreign Exchange Risk McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All.

Accounting 6570 Chapter 6 –Foreign Currency Transactions and Hedging Foreign Exchange Risk.

© 2010 Cengage Learning. All rights reserved. CHAPTER 7 GLOBAL  PENG.

Chapter 18 The International Financial System. Copyright © 2007 Pearson Addison-Wesley. All rights reserved Unsterilized Foreign Exchange Intervention.

 Foreign Exchange. Basics of Forex  Marketplace where currencies are exchanged  Critical for conducting foreign business  Largest financial market.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Developed.

Chapter 12 The Foreign- Exchange Market. ©2013 Pearson Education, Inc. All rights reserved Topics to be Covered Spot Rates Forward Rates Arbitrage.

1 Lectures 15 & 16 The International Financial System.

Chapter 19 The International Financial System. © 2013 Pearson Education, Inc. All rights reserved.19-2 Intervention in the Foreign Exchange Market A central.

Global Business Today 6e by Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 15 The International Monetary Fund.

Chapter 21 International Financial Management. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. PPT 21-1 FIGURE euro.

The International Financial System Chapter 13 © 2003 South-Western/Thomson Learning.

EXCHANGE RATES Chapter 8 Lecture 2. EXCHANGE RATES Defined as the number of units of one currency that have to be paid to acquire a unit of another currency.

7 Foreign Exchange Risk and Risk Control Instruments Name: Thoeun Sarkmark Na ID: 092SIS37.

The Foreign Exchange Market

Chapter 3 Foreign Exchange Determination and Forecasting.

The Foreign Exchange Market November 8 and 10, 2011.

Section IV Payment Terms and Procedures.

International Business 9e

FINANCIAL ENVIRONMENT Chapter Three

International Monetary System

Dealing with Foreign Exchange Karen Macalinao MBA 105.

Presentation transcript:

© 2013 Cengage Learning. All rights reserved. CHAPTER 7 GLOBAL2  PENG © J Marshall—Tribaleye Images/Alamy

© 2013 Cengage Learning. All rights reserved. CHAPTER 7 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1.List the factors that determine foreign exchange rates. 2.Articulate and explain the steps in the evolution of the international monetary system. 3.Identify strategic responses firms can take to deal with foreign exchange movements. 4.Identify three things you need to know about currency when doing business internationally.

© 2013 Cengage Learning. All rights reserved. LO1: EXAMPLE OF KEY EXCHANGE RATES (4/6/11) Source: These examples are from April 6, Adapted from “Key currency cross rates,” Wall Street Journal, 6 April 2011, available at [accessed 6 April 2011]. Copyright © 2011 Dow Jones & Company, Inc. All Rights Reserved. Reading vertically, the first column means US$1 = C$0.96 = ¥85 = Mexican Peso = SFr 0.92 = £0.61 = €0.70. Reading horizontally, the last row means €1 = US$1.43; £1 = US$1.63; SFr 1 = US$1.09; Mexican Peso 1 = US$0.08; ¥1 = US$0.01; C$1 = US$1.04.

© 2013 Cengage Learning. All rights reserved. LO1: WHAT DETERMINES FOREIGN EXCHANGE RATES?

© 2013 Cengage Learning. All rights reserved. LO1: PURCHASING POWER PARITY A conversion that determines the equivalent amount of goods and services different currencies can purchase. The Big Mac Index

© 2013 Cengage Learning. All rights reserved. LO1: INTEREST RATES AND MONEY SUPPLY If one country’s interest rates are high relative to the interest rates of other countries, it will attract foreign funds. Inflation causes currency to depreciate.

© 2013 Cengage Learning. All rights reserved. LO1: PRODUCTIVITY Rise in a country’s productivity brings increase of FDI, fueling demand for its home currency.

© 2013 Cengage Learning. All rights reserved. LO1: BALANCE OF PAYMENTS A country’s international transaction statement.

© 2013 Cengage Learning. All rights reserved. LO1: BALANCE OF PAYMENTS

© 2013 Cengage Learning. All rights reserved. LO1: EXCHANGE RATE POLICIES Floating (flexible) exchange rate policy – willingness to let demand and supply conditions determine exchange rates.  Clean float  Dirty float Fixed rate policy – fixes exchange rate relative to other currencies.

© 2013 Cengage Learning. All rights reserved. LO1: INVESTOR PSYCHOLOGY Primary factor in short-run movements Bandwagon effect Capital flight

© 2013 Cengage Learning. All rights reserved. LO2: THE EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEM  The Gold Standard ( ) Gold used as common denominator © iStockphoto.com/Talaj

© 2013 Cengage Learning. All rights reserved. LO2: THE EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEM  The Bretton Woods System ( ) US dollar as common denominator © iStockphoto.com/Anton Vakhlachev

© 2013 Cengage Learning. All rights reserved. LO2: THE EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEM  The Post-Bretton Woods System (1973- present) No common denominator; diversity of exchange rates.

© 2013 Cengage Learning. All rights reserved. LO2: INTERNATIONAL MONETARY FUND (IMF)  Legacy of Bretton Woods system.  Lender of last resort for countries experiencing balance of payments problems.  Each member country assigned a quota that determines required contribution.  Loans typically require long-term policy reforms.

© 2013 Cengage Learning. All rights reserved. LO3: STRATEGIC RESPONSES TO FOREIGN EXCHANGE MOVEMENTS Strategies for Financial Companies Main goal – to profit from foreign exchange market.  Spot transactions – single-shot exchange of one currency for another.  Forward transactions –purchase or sale of currencies for future delivery.  Currency hedging – a transaction that protects trades and investors from exposure to the fluctuations of the spot (daily) exchange rate.  Currency swap – conversion of one currency into another at Time 1, with agreement to revert it back to original currency at Time 2 in the future.

© 2013 Cengage Learning. All rights reserved. LO3: STRATEGIC RESPONSES TO FOREIGN EXCHANGE MOVEMENTS  Typically three outcomes: A razor-thin spread Quick decisions on buying and selling Ever-increasing volume in order to make more profits

© 2013 Cengage Learning. All rights reserved. LO3: STRATEGIC RESPONSES TO FOREIGN EXCHANGE MOVEMENTS Strategies for Non-Financial Companies  Invoicing in their own currencies  Currency hedging  Strategic hedging

© 2013 Cengage Learning. All rights reserved. LO4: THREE THINGS TO KNOW ABOUT CURRENCIES Fostering foreign exchange literacy is a must. Risk analysis of any country must include an analysis of its currency risks. A currency risk-management strategy is necessary—via invoicing in one’s own currency, currency hedging, or strategic hedging.

© 2013 Cengage Learning. All rights reserved. DEBATE: IMF’S ACTIONS, CRITICISMS, AND REFORMS