Currency Markets and International Monetary Systems
After reading Module 5 on Currency Markets and International Monetary Systems, answer the questions below:
Questions
Answer question 1 which is about foreign exchange rates. Then go on and answer either question 2 or question 3.
Note that, while the textbook may have information on questions 2 and 3, you are expected to have to do some further research on your own to arrive at answers good enough for a score equivalent to an A.
Question 1. The table shown at the link here is taken straight from the Wall Street Journal’s web site. Take Thursday’s rates to answer 1a and 1b. Use only the figures from this table and not other figures you find online. You may round off your answer to 2 decimal places, but as you calculate do not round off rates to fewer than four decimal places. ForEx Sep 6 2018.pdf
Show how you arrive at your answer. E.g. to answer the question, “How much is $16 is worth in South African rand?”, if $1 = 15.3332 rand, write out $16 x 15.3332 = 245.3312 rand, or note that 1 rand = US$ 0.0652 and write out $16/0.0652 = 245.3988.
What are £25,000 (GBP) worth in US dollars?
What are ¥10,000 Japanese yen worth in terms of euros? (Use only figures in the table provided to reach your answer.)
In the table, has the Canadian dollar gained or lost value from Wednesday to Thursday, and how can you tell?
Suppose the US dollar gains 10% in value against other currencies? Will this help or hinder US exports, and why? (Answer in one sentence.)
Either question 2. The IMF recognizes the US dollar, the euro, the Japanese yen, the British pound and the Chinese yuan as “reserve currencies” that are accepted by governments and institutions in settling international payments. Mention and explain at least two advantages and one disadvantage, related to international trade or the US economy, that the US has because the dollar is a reserve currency.
Or question 3. The euro is the currency adopted by 19 of the 28 members of the European Union. Mention briefly explain at least two benefits that the Eurozone brings to businesses and consumers. Then at least one potential drawback that membership of the Eurozone can have.