the price at which one currency may be exchanged for another.
Questions tagged [exchange-rates]
180 questions
16
votes
3 answers
Should Finland leave the eurozone?
Finland's economic recovery from the shock of the global financial crisis of 2007–2008 has been very weak. The country has been in recession for the past three years, with GDP expected to expand by only 0.8 percent this year. See Chart 1 below…
Marko Amnell
- 409
- 3
- 9
15
votes
3 answers
Real Exchange Rate vs PPP rate
I'm having troubles to understand the difference between the Real Exchange Rate and the PPP rate.
I know the first one is calculated using a basket of goods and services so that the non-tradeable basket costs the same in 2 countries (imagining a…
Diego Jancic
- 579
- 1
- 5
- 10
12
votes
5 answers
How does a country devalue its currency?
I recently read an article in the New York Times that talked about China devaluing its currency (which I believe is held to a peg against the US Dollar). My question is: specifically what tools does a central bank of a country employ to devalue its…
rambalachandran
- 367
- 1
- 2
- 8
10
votes
1 answer
How does a bank convert one currency to another?
Say for example I sell ZAR and buy USD. What happens behind the scenes so that the local ZAR bank is able to deposit USD into my account?
Does the bank require some sort of USD cash reserve?
How do the banks interact/negotiate with each…
Jasper Citi
- 223
- 1
- 4
10
votes
3 answers
How is it possible that all currency exchange rates are fixed w.r.t. to each other?
I wondered if it would be beneficial to exchange a currency through one or more "in-between" currencies.
For example: instead of trading Russian Ruble (RUB) to Euro's (EUR), one would trade from RUB to US Dollars (USD) and then to EUR.
Neglecting…
Saaru Lindestøkke
- 203
- 1
- 7
9
votes
3 answers
Why did the Swiss National Bank abandon its currency peg so suddenly?
There are many theories about why the Swiss National Bank (SNB) abandoned its currency peg a few days ago.
My question is more specific: why did they make the change so sudden? Why not reduce the peg to 1.19 (Francs needed to buy one Euro) one…
zkurtz
- 375
- 1
- 9
8
votes
3 answers
What are the differences between the older gold standard and the current fiat money standard?
My current limited understanding is that the gold standard was a system in which there was a fixed currency amount per unit of gold. For example, 1 ounce of gold might be 100 USD. Another country like UK might peg their currency to be 1 ounce of…
qwer
- 181
- 2
8
votes
3 answers
What determines the exchange rate of two fiat currencies if the supply of each is known?
In this blog post, economist Steve Landsburg posed a question about the value of Bitcoin which he didn't know the answer to.
Imagine a future in which Bitcoins (or some other non-governmental
currency) are widely accepted and easily substitutable…
Keshav Srinivasan
- 858
- 4
- 18
8
votes
2 answers
What would happen if the world switched to a single currency?
What would happen if all countries suddenly stopped using local currencies and adopted a global currency (like the Euro, but for everyone)?
oyvind
- 199
- 4
8
votes
2 answers
Currency Devaluation and the causes of the Tequila Crisis
I was reading about some of the famous crisis that happened in the past and i came across "the tequila crisis" in mexico during 1994-96.
As a background, The Tequila crisis (also known as the Mexican Peso Crisis or December mistake crisis) was a…
suhail
- 83
- 4
7
votes
1 answer
How can the Swiss exchange rate be very biased in a free market?
In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate with Switzerland was 1.60 CHF (Swiss Franc) = 1€ (Euro).
The prices and salaries in Switzerland were slightly higher than in its neighbours, but reasonably…
Bregalad
- 331
- 1
- 8
6
votes
1 answer
How does US (its economy, banks, industry) profit from dollar being the "standard currency"?
How does US (its economy, banks, industry, "finance industry") profit from dollar being the "standard currency"? I am not seeking "ideological" explanations, but explanations of the mechanisms involved, of the kind of "how things work", better…
John Donn
- 219
- 1
- 5
6
votes
2 answers
If Greece defaults, can it still stay with the euro?
Should Greece default, a forced conversion from euros to drachmas will be a further catastrophe to Greek economy as the drachma will quickly collapse. However, if Greece leaves the Eurozone, but keeps the Euro as a national currency (at least for a…
Alek Andreev
6
votes
1 answer
Interest rate parity: Counter intuitive
What is the basis for interest rate parity to hold?
I know, the reason stated is excess returns
Excess returns as such should not be the reason for a currency depreciation. for e.g. when we posit that forward rate converge to the spot rates over…
Nitin Siwach
- 71
- 1
6
votes
1 answer
Australian Dollar Devaluation
I am a layman in economics. I am curious about the current devaluation of Australian Dollar in comparison with the US Dollar. Could someone please explain, in simplest words possible:
What causes currency devaluation? Is it a variety of factors or…
Turing Machine
- 63
- 3