Factors Influencing Exchange Rate Between the US Dollar and Euro - Essay Example

Free

Extract of sample
Factors Influencing Exchange Rate Between the US Dollar and Euro

The various factors that are considered as influencing factors on dollar-euro exchange rate are the international real interest rate differential, relative prices in the traded and non-traded goods sectors, the real oil price, and the relative fiscal position (Dollar-euro currency exchange). A look into the various analytical works prove that the main reason behind the present fall in dollar value is the large trade deficit, which, in turn, was created by the flow of foreign investment dollars into the US economy. One can say undoubtedly that the world countries will not let the dollar go down as such a fall will adversely affect their own national interests. To illustrate, the US economy offers more return on capital than its European counterparts. As a result, foreign governments, especially the Asian giants like China, Japan and India, have purchased considerable amounts of US dollars as reserve backing for their own currencies. So, a significant fall in the dollar will have an adverse impact on these investor economies. Admittedly, the present day fall in dollar value is primarily as a result of the decline in private foreign investment and is in no way connected with foreign governments. Before its fall, dollar witnessed a sharp rise against the euro, and because of this growth, there arose a belief among private investors that dollar has become too expensive to afford. ...
Download paper

Summary

Factors Influencing Exchange Rate between the U.S. Dollar and Euro Factors Influencing Exchange Rate between the U.S. Dollar and Euro A look into the performance of dollar shows that it fell by 30% against euro in the year 2010…
Author : barryfriesen
Download 0

Related Essays

Fixed Exchange Rate and Floating Exchange Rate Systems
Under the system of Bretton Woods, the various countries’ major currencies were used to be fixed in relation to the Dollar while the Dollar was fixed with respect to the value of gold. This system indicated that the threat of currency instability was to be abided by the governments. As a result of this system, the corporation houses were to deal with lesser trading activities related with foreign currencies on a large volume. The system of the Bretton Woods Agreement at that time was factually capable of providing significant firmness within the markets of currencies (Hussain, 2010). The...
10 pages (2510 words) Assignment
The association between the derivatives products and the financial risk management is quite substantial and significant
In order to operate in an effective manner, the banks need to manage their assets and liabilities from the various risks prevailing in the economy, one of which is the interest rate risk. Interest rate risk is the risk to earnings or capital arising from movement of interest rates. The need to manage the interest rate risk is very crucial for any bank and it has generally been observed that the interest rate risk management form the integral part of the risk management policies of all major global banks. This dissertation analysis the effectiveness of “interest rate swaps” in managing the...
41 pages (10291 words) Dissertation
The Causality Relation between the Kazakhstan Stock Market and the US Dollar, the Euro and the Russian Ruble.
The relation between the Kazakhstan tenge and other currencies is examined by statistical time series analysis. The relationship of exchange rates over a specific period of time is studied based upon bivariate and multivariate variables. Currency has continuously evolved as the domestic and international vehicle for trade. This paper will define and discuss the history of the causality relation between the Kazakhstan Stock Market and the tenge, and the US Dollar, the Euro, and the Russian Ruble. The research includes a quantitative analysis by using several statistical methods to support the...
80 pages (20080 words) Dissertation
Determination of Exchange Rate
The initial period was 1870 to 1914 where most countries adopted the gold standard where gold was used as domestic money. The above gold standard was a uniform exchange rate regime, though some countries constantly used silver while other countries gold inconvertible currencies (Ehrmann and Fratscher, 2004, p. 105). The start of the First World War interrupted this exchange rate era thereby bringing in the second phase that was 1914-1946. Under this second period, there were many changes as many countries saw great variations of currencies used among countries and the over time. Exchange...
16 pages (4016 words) Coursework
Hedge and Exchange Rate Effects
The model publicities play a role in the features of the industry. For all stated nations, the affiliation amid the publicity and the commerce features is widely consistent with the economic hypothesis (Bodnar & William 29). Bodnar, Gordon and William claim that it was the contribution of leading financiers’ trade and affordability conferences and the Princeton Finance Seminars through helpful remarks. The provision of information on the direct financial speculation of Japan assisted in the recognition of the trends, developments and regressions made in the financial systems of the three...
8 pages (2008 words) Coursework
Comparative Study of US Dollar and Euro
Apart from its superior position in markets around the world US Dollar seems as more prepared, compared to other currencies, to face long term economic pressures. Reference is made in particular to Euro, a currency that has challenged the hegemony of US Dollar in global market. Current paper provides a comparative analysis of the two currencies. Emphasis is also given on the factors which have mostly affected the performance of these currencies, especially in regard to 2009 onwards. The financial recession of 2008 and the Euro zone debt crisis, that followed, are used as key events for the...
8 pages (2008 words) Essay
Japan Exchange Rate Regime
The major currency that is used in Japan is Yen and all matters related to the currency were normally administered by the Ministry of Finance. However, the administration was carried out with the cooperation of the Ministry of International Trade (MITI) and Industry and the bank of Japan. MITI also handled licenses related to exports and imports. However, the authority for approving major payments was given to the authorized banks in Japan.Studies reveal that trade in Japan was being regulated by the government directly before 1949. During this time, the country practiced multiple exchange...
5 pages (1255 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!