Foreign Exchange Market

Chapter The Foreign Exchange Market 9

Case: The Axis hedges the Euro ,[object Object],[object Object],[object Object]

The foreign exchange market ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Functions of the foreign exchange market ,[object Object],[object Object],[object Object]

Currency conversion ,[object Object],[object Object],[object Object],[object Object]

Reducing risk ,[object Object],[object Object],[object Object],[object Object]

Foreign exchange quotations, June 18,2003

Foreign exchange trade growth $ billions

The foreign exchange market (FX) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Hierarchy of international financial centers Note: Size of dots (squares) indicates cities’ relative importance São Paulo Rio de Janiero Mexico City San Francisco New York Toronto Bombay Melbourne Sydney Tokyo Hong Kong Singapore Paris Zurich Frankfurt Amsterdam Vienna Madrid Hamburg Dusseldorf Rome Brussels Chicago London Basel

Economic theories of exchange rate determination ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Law of one price ,[object Object],[object Object]

Purchasing power parity ,[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Price in Local Currency Implied PPP of the Dollar Actual Exchange Rate 17/04/01 Local Currency % Over(+) or Under(-) Valuation Against Dollar Price in Dollars Big Mac Prices The Big Mac Index: PPP, April 2002 Table 9.2

Money supply and inflation ,[object Object],[object Object],[object Object]

Interest rates and exchange rates ,[object Object],[object Object],[object Object],[object Object]

Investor psychology and bandwagon effects ,[object Object],[object Object],[object Object],[object Object]

Exchange rate forecasting ,[object Object],[object Object],[object Object],[object Object]

Approaches to forecasting ,[object Object],[object Object],[object Object],[object Object]

Currency convertibility ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Counter trade ,[object Object],[object Object]

Managerial implications ,[object Object],[object Object],[object Object],[object Object],[object Object]

Foreign Exchange Market

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Foreign Exchange Market