Question

The following are quotes from a currency dealer in the New York currency market:

Currencv Spot quot<e Australian dollar (AUD/USD) 0.7177 - 0.7179 Brazilian real (USD/BRL) British pound (GBPUSD) Canadian dollar (USD/CAD) Euro (EUR/USD) Japanese yen (USD/JP Mexican peso (USD/MXP) New Zealand dollar (NZD/USD) 0.6799 - 0.6801 Thai baht (USD/THB) South Africa rand (USD/ZAR)13.859 - 13.889 South Korean won (USD/KRW)1117.34 - 1119.34 Swiss franc (USD/CHF) 3.6854 - 3.6858 1.2775 - 1.2778 1.3208 - 1.3212 1.1528 - 1.1532 108.29 - 108.30 19.232 - 19.241 31.940 - 31.960 0.9756 - 0.9761

Using the quotes provided above, answer the following question. (Phrase your explanation in parts b and d: as “If you sell one (specify the currency) to the dealer, you will receive (specify the number of units and the currency)” or “If you buy one (specify the currency) from the dealer, you will pay (specify the number of units and the currency)”.)

1 Using the quotes provided above, how many units of the foreign currency indicated would it take to purchase one million US dollars

a. New Zealand dollars       

b. South Africa rand            

c. British pounds       

d. Thai baht   

(In these transactions, the customer is buying US$, paying foreign currency.)

Answer 1

Purchase US$1,000,000

a.1NZD = 0.6799USD-0.6801USD

Customer will pay NZD and buy USD

NZD required to buy 1,000,000 USD = 1,000,000/0.6799

= NZD 1,470,804.53

b. 1 USD = ZAR13.859- ZAR13.889

Customer will buy USD, Dealer will sell USD

ZAR required = 13.889*1,000,000

= ZAR 13,889,000

c.1 GBP = USD 1.2775-1.2778

GBP required = 1,000,000/1.2775

= GBP 782,778.86

d. 1 USD = THB 31.940-31.960

THB required = 1,000,000*31.960

= THB 31,960,000