Question

Hello:

Please help with this question: Prepare a scholarly paper that differentiates foreign exchange trading within Asian as compared to Europe and the Americas. Think about the flexible and fixed exchange rate systems within the international context.

Please list your reference.

Thank you,

Judy M. Robinson

Answer 1

Now a days most of the countries follow floating exchange rate system and some has pegged their currencies against single currency or basket of currencies and a few countries, ie. China, Vietnam, Singapore follow loosely fixed exchange rate system but no country's currency is 100% fixed or floating and their governments/central bank intervenes to control devaluation of their currency in order to maintain stability in their currencies.

In the past globally fixed exchange rates was followed and a country's currency's exchange rate was fixed in terms of gold and this was called gold standard and after the end of second world war and in 1944 Bretton woods agreemnet all the countries agreed to pegg their currencies against USD and USD was pegged against gold and an ounce of gold was equal to USD 35 but US was no longer to hold this and it has discontinued this.

But many a countries pegg their currencies in USD in order to have fixed exchange value of their currency in order to maintain stability in their currency in order to attract Foreign direct investment and long term stability.

Some of the asian countries- China, India, Vietnam pegg their currencies against the USD.

China follow loose fixed exchange rate system and uses last trading day closing exchange rate and fixes its exchange rate at 2% trading band around that exchange rate.

Countries in Americas, Cuba, Panama has pegged their currencies to the USD for having stability in their currencies.

Mexico had to devalue its currency peso to 30% against USD in order to recover from the speculation pressure due to its fixed exchange rate system.

in Europe many countries has fixed/pegged their currencies against Euro for having stability in their currencies, i.e. Denmark, Switzerland.

Conclusion: Now a days no country's currency is fully fixed or float and every government/central bank controls its currency in the international market in order to maintain its stability and decrease/stop its continuous depreciation since same is very necessary to have stability in the currency and to attract FDI.