StudentShare solutions
Triangle menu

Currency Exchange - Essay Example

Nobody downloaded yet

Extract of sample
Currency Exchange

Around 1967 the GBP was devalued by 14 per cent, a major economic policy decision. Since then, the Sterling, on average has either depreciated or appreciated by 14 per cent every two years. The figure below shows how the exchange rate between the Sterling and the United States dollar has performed over a 5 year period. Around the mid 2008 shows a sharp drop in the exchange rate from around 2.0 to a low of 1.4. The significant change in the movement is attributed to the financial recession of the 2008. Sterling/US dollar exchange rate over the last one year For the past one year, the Sterling has been weak against the USD making the USD an expensive and valuable asset. This means that the clients needing to buys the currency are paying more and more. The reason for this slide may be due to the steps forward by Europe and the US. For instance the situation in Italy may be the key factor for the change in exchange rates which could go on for the next couple of weeks. Also, with a further round of Quantitative Easing expected in the UK, the Sterling has been losing ground against the USD. Rates have dropped and whilst many expect this trend to continue should QE be confirmed, this in my view is being priced by the investors. Notably, the pound is not only losing ground against the USD but against other major currencies and the recent drop against the Euro and the Australian Dollar are no coincidence. It is floating around 1.50 against the USD and at an all-time low against the AUD. The following figures give the performance of the Sterling against the USD for a the last 12 months, narrowing down to 6 months and 3 months respectively. Key factors affecting the Sterling Being the sixth largest economy in the world and the third largest economy in Europe, the United Kingdom has a lot to boast about. For instance, the United Kingdom is able to produce over 60 per cent of its food with less than 2 per cent of the labour force. The United Kingdom also has numerous resources at its disposal, for instance oil, natural gas and coal. However the country was hit hard the financial crisis with growths rates going down to 0.3 per cent in Quarter 1 of 2010 and 0.4 per cent growth in Quarter 4 of 2009. The UK has a capitalist economy that is highly productive with a strong financial services industry. On a global basis the British Sterling Pound is undervalue. For instance, the purchase price parity shows that the Sterling should fall in value over time, but high investment flow potential means the opposite is what will happen, that is the Sterling will increase in value. According the United Kingdom’s Value Investor Survey, which reflects short term investment, the economic environment is very favourable for long term economic growth because of high scores on the government transparency, economic diversity and economic freedom. An undervalued currency, a favourable business environment and a moderate investment flow potential leads to a positive outlook for the United Kingdom investments. Factors that have positively affected the British Sterling Pound are lower rates of unemployment and the foreign students. The UK, the US and Australia are the leading centres in attracting foreign students to study in their countries. These students obviously provide many social and monetary benefits that propel the economic activities of the host countries. Some factors that have negatively affected th ...Show more


Currency Exchange Assignment Name: XXXXX Professor: XXXXX Institution: XXXXX Course: XXXXX Date: XXXXX Sterling/US dollar exchange rate over the last 5 years Since the collapse of the Bretton Woods system, exchange rates between currencies have been very unstable…
Author : xgoodwin
Currency Exchange essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Currency Exchange"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

The influence of changing currency rates on consumers travel behaviour: Exploring UK consumers travel to Europe
The exchange rate is affected by factors that are associated with the export/import status of a country. In having an exchange rate that favors the currency of outside nations, a country has a competitive advantage. Currently, the euro has stood on the lesser ground than the UK pound. Tourism into the rest of Europe is favorable to UK consumers.
8 pages (2000 words) Essay
Discuss the Role of Exchange Traded Currency Options in Risk Management
Expiry date and price of the exercise are highly taken into account. The year 1982 saw the initiation of exchange traded foreign exchange options. Specifically, London, Chicago and Philadelphia were the first places where currency options were traded. Futures and options basically characterized the transactions undertaken in the currency options market.
9 pages (2250 words) Essay
Foreign Exchange Exposure - Concepts of Foreign Currency and Exchange Rates
These companies engages in international trade through foreign exchange forward contracts and options and cross currency swaps to hedge various currency exposures. These exposures primarily include assets, liabilities and bonds denominated in foreign currency.
3 pages (750 words) Essay
Exchange rate diagram
Therefore, the exchange rate would decrease when the foreign price level increases. The domestic price level would remain unchanged. Under a fixed exchange rate regime, however, the exchange rate (e) is fixed, as shown in Figure 2. Therefore, as the aggregate demand for domestic currency increases, the aggregate supply of domestic currency must also increase in order to maintain the fixed exchange rate (e).
3 pages (750 words) Essay
Foreign Exchange Currency Markets
Historically speaking, gold has been important as a metal and as a currency for thousands of years. However, it was only in the last century that an international gold
5 pages (1250 words) Essay
Currency Exchange
The history of the pound sterling/USD shows that the rate did not change at all between 1949 and 1966. Around 1967 the GBP was devalued by 14 per cent, a major economic policy decision. Since then, the Sterling, on average
9 pages (2250 words) Essay
Summarize how currency exchange and labor rates impact trade
Most companies in the United States usually outsource their jobs to overseas subsidiaries which offer low labor cost as well as provide tax havens for the multinational
1 pages (250 words) Essay
A macroeconomic Theory of the Open Economy, Supply and demand for Loanable Funds and for Foreign-Currency Exchange
Money from all the institutions meet and enable the conduction of economic activities (McConnell, Campbell, Brue and Stanley 96- 122). Those entities that save as the consumers, provide the loanable funds to the
15 pages (3750 words) Essay
Discuss trade - how does it work Is it good or bad What role do exchange rates play - talk about our relationship with China and their currency. This is a big topic - provide different points of view and backup your analysis with research
International trade is good for consumers of all countries because they get goods and services at the most economical prices; however, certain manufacturers suffer due to their higher costs of production either due to costlier labor or higher raw material costs in their
2 pages (500 words) Essay
Currency Exchange Rate
The importance of flexibility in the exchange rate for easier correction of imbalances current account has long been at the heart of international debate. Before the financial crisis World, these debates were focused on global imbalances and the role of exchange rate policies several major Asian and oil-exporting countries with external surpluses.
16 pages (4000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us