Explain the factors that are relevant in trying to explain how to determine exchange rates. Why do you feel it is so difficult to forecast interest rates?
Following factors are relevant in determination of exchange rates :
i) Rate of Inflation : The rate of Inflation impact the rate of exchange of currency of a country.It detetmines the growth rate and the country having low rate of Inflation in comparison to other country it's currency will always appreciate in comparison of other.
ii) Rate of Interest : Rate of interest and foreign currency exchange rate are directly correlated to each other.Higher the interest rate higher the rate of appreciation of foreign currency.
iii) Debt of government : Debt obtained by government is a national debt and it leads to higher Inflation as the amount of debt increases so it indirectly impact exchange rates with increase in government Debt.
It is very much difficult to forecast interest rate since it depends upon large number of factors which can impact it.Interest rate can not be determined by individual bank, it is determined by numerous investor trading in credit markets which impact interest rates. Any change in any such components like risk free rate can directly impact interest rates.
Explain the factors that are relevant in trying to explain how to determine exchange rates. Why...
1) Explain the factors that are relevant in trying to explain how to determine exchange rates. Why do you feel it is so difficult to forecast interest rate?
Determination of exchange rates depends on factors causing fluctuations. Explain why and its effect on US dollar Distinguish between DER & IER.
Explain the factors affecting exchange rates in a floating exchange rate system. (more details)
5. Understand the factors that affect exchange rates. a) Be able to determine what would happen to each currency in a currency pair for changes in the different factors. e.g. if the Canadian income level decreased, while the U.S. income level remained the same, you would you expect the Canadian dollar to against the U.S. dollar. Why?
Explain what safety factors are relevant to a motor carrier and why important.
explain the factors that determine the Euro/US exchange rate in the Foreign exchange market in recent years?
Explain how interest rates, inflation, and market psychology affect foreign exchange. How can organizations protect themselves from foreign exchange volatility. Apply to any currency of your choice. When referring to interest rate, please differentiate real interest rates from nominal interest rates, short-term vs. long-term effect.
Which factors affect the exchange rates of the Australian dollar with respect to US dollar in terms of the monetary theory of exchange rate. Why the monetary theory is deficient?
Topic 1. Fundamental Analysis We studied that there are three ways to forecast exchange rates. In this thread, I would like to discuss fundamental analysis. Some issues to consider: What types of determinants do you think are important in terms of exchange rates? Where could we get measures of those determinants in practice? Are there macroeconomic variables that are more important than others for the determination of exchange rates? Do you think it is harder/easier to forecast fixed or flexible...
Use the concept of the real exchange rate to explain why high rates of inflation in a country are seen as a problem. Is this problem worse under a fixed or flexible exchange rate regime?