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Exchange rates are phrased as a number, which typically begins with 1. This is basically a shorthand for saying: 1 unit of the first currency is worth this number of the second currency. For example, if the first currency is GBP and the second is Euro, and the exchange rate is 1.5, then 1 unit of GBP is worth 1.5 Euros. Current exchange rates of major world currencies. Find updated foreign currency values, a currency converter and info for foreign currency trading. 1) A weighted average of the foreign exchange value of the U.S. Dollar against the currencies of a broad group of major U.S. Trading partners. 2) A weighted average of the foreign exchange value of the U.S. Dollar against a subset of the broad index currencies that are advanced foreign economies.
A summary for understanding exchange rates. Factors that affect exchange rates and the impact of exchange rates on the economy.
Terminology
- Depreciation/devaluation – fall in value of exchange rate – exchange rate becomes weaker (see also: definition of devaluation and depreciation)
- Appreciation – increase in the value of exchange rate – exchange rate becomes stronger.
Example of Pound Sterling depreciating against the Dollar
- £1 used to equal $2.
- Now £1 is only equal to $1.75
What does this Depreciation in the value of the Pound mean?
- Buying goods from America becomes more expensive.
- If a meal cost $10, it used to require £5 (10/2) for a British tourist.
- But, now after the depreciation, the $10 meal will cost £5.71 (10/1.75)
- The depreciation in the pound may discourage British tourists to travel to the US.
- It makes US imports into the UK more expensive, so it may reduce UK imports
- UK exports will become relatively more competitive. It is cheaper for Americans to buy UK goods, so the quantity of exports should increase.
- UK inflation will increase. Imported goods are more expensive (cost push inflation). Also, British goods are more attractive causing a rise in demand (demand pull inflation)
Summary of depreciation
- A depreciation in exchange rate makes exports more competitive and imports more expensive
- A depreciation helps UK exporters and improves UK growth prospects, but causes higher prices and inflation.
Effects of appreciation
The effects of an appreciation in Sterling will lead to the opposite.
- A higher value of sterling makes US imports cheaper for British consumers, but, UK exports become more expensive.
- An appreciation in the exchange rate will tend to reduce aggregate demand (assuming demand is relatively elastic) Because exports will fall and imports increase.
- An appreciation is likely to worsen the current account (assuming Marshall Lerner condition and demand is relatively elastic)
An appreciation is likely to reduce inflation because:
- Import prices are lower
- Fall in aggregate demand
- Firms have more incentives to cut costs.
Is it good or bad to have a devaluation in the exchange rate?
A falling exchange rate can be beneficial if the economy is uncompetitive and stuck in a recession. A devaluation helps to increased demand for exports and create jobs. In a recession, inflation is unlikely to be a problem. However, in a boom, a devaluation could lead to inflation. Also, a devaluation does reduce living standards as imports become more expensive.
An appreciation in the exchange rate is beneficial if it is caused by the economy becoming more productive and competitive. However, if there is an appreciation due to speculation, then it could be harmful as exporters will not be able to compete. E.g. The Swiss intervened to prevent the Swiss France becoming too strong in recent Euro crisis.
See more detail on the effect of exchange rates on business
Factors influencing exchange rates
In 2007-08, there was a substantial fall in the value of the £, due to the financial crisis and cut in UK interest rates.
An exchange rate is determined by the supply and demand for the currency. If there was greater demand for Pound Sterling, it would cause the value to increase. Example: An appreciation in the exchange rate could occur if the UK has:
- Higher interest rates. Higher interest rates make it more attractive to save in the UK, therefore more investors will switch to British banks. Therefore the value of the pound will increase.
- Lower inflation. If British goods become more competitive, there will be greater demand causing the value to increase.
- Current account surplus. A current account surplus means the value of exports (of goods and services) is greater than imports. This demand for UK goods tends to cause stronger exchange rate.
See also: Factors influencing exchange rates
![Currency exchange rates central bank Currency exchange rates central bank](https://thumbs.dreamstime.com/b/world-currency-exchange-rate-digital-display-board-background-66896688.jpg)
Floating Exchange Rates
Word 2013 for mac free. download full version. A floating exchange rate occurs when the government doesn’t intervene but allows the value of the currency to be determined by market forces.
Fixed Exchange Rate
This occurs when the government intervenes to try and keep the value of the currency at a certain level against other currencies. For example, in 1990, the UK joined the Exchange Rate Mechanism where the value of Pound was supposed to keep within a certain target band against D-Mark.
The UK was later forced out of the ERM – see: Exchange Rate Mechanism Crisis
Currency Manipulation
Some countries are not part of an official exchange rate mechanism, but they may still to try influence their currency. For example, China has sought to keep the value of their currency undervalued by buying US assets. The motive for keeping exchange rate undervalued is that exports become more competitive leading to higher growth. Some argue this intervention is a form of ‘unfair competition’ and it can be termed currency manipulation
Single Currency
![Currency Exchange Rate Currency Exchange Rate](https://media.cheggcdn.com/media%2F274%2F274ca535-b77d-4c9d-b3a5-e2430b27bbc8%2FphpM9TDF4.png)
Currency Exchange Rate Today
The Euro is a bold attempt to replace individual currencies with a single currency. The idea is to eliminate exchange rate fluctuations. However, the Euro has run into several problems. In particular, uncompetitive countries are no longer able to devalue to restore competitiveness. See: Problems of Euro
Related
By Christian Ankerstjerne
Official Rates, 1939
These exchange rates were used in a German intelligence document, published in 1939.
Country | 100 of currency in Reichmark | 100 Reichmark in currency |
---|---|---|
France (Francs) | 16.41 | 609.37 |
Great Britain (Pounds) | 1224.00 | 8.17 |
Italy (Lira) | 20.08 | 498.00 |
United States (Dollars) | 248.00 | 40.32 |
Western Europe, 1940
These exchange rates are those imposed by Germany following the invasion in 1940:
Country | 100 of currency in Reichmark | 100 Reichmark in currency |
---|---|---|
The Netherlands (Guilder) | 150.00 | 66.66 |
Belgium (Francs) | 10.00 | 1000.00 |
Luxembourg (Dollars) |
European Countries, 1941-1942
The exchange rates in the table below were the Wehrmacht exchange rates. Pokemon sapphire emulator mac. These were the exchange rates used by German forces, which, for occupied countries, were set artificially low. This increased Germany's purchasing power, thus exploiting the occupied countries' economies. As an example, compare the more than three times higher Reichmark/French Franc exchange rate in the 1939 table with that in the table below.
Historical Currency Exchange Rates
In addition to cash currency, Germany imposed large lines of credit on occupied countries' central banks, which paid for local contracts, essentially forcing the occupied countries to pay for their own occupation.
Programa rar para mac. The full table is listed in a document from 15 April 1942. An earlier document from 27 May 1941 list identical exchange rates for the following countries:
- Bulgaria
- Croatia
- Finland
- Greece
- Hungary
- Italy
- Romania
- Russia
- Serbia
- Slovakia
Country | 100 of currency in Reichmark | 100 Reichmark in currency |
---|---|---|
Belgium (Francs) | 8.00 | 1250.00 |
Bulgaria (Leva) | 3.08 | 3250 |
Croatia (Kuna) | 5.00 | 2000.00 |
Denmark (Kroner) | 52.20 | 191.57 |
Finland (Marks) | 5.07 | 1974.33 |
France (Francs) | 5.00 | 2000.00 |
Greece (Drachmas) | 1.67 | 6000 |
Hungary (Pengö) | 60.90 | 164.20 |
Italy (Lira) | 13.15 | 760,46 |
Norway (Kroner) | 57.00 | 175,44 |
Poland (Zloty) | 50.00 | 200.00 |
Portugal (Escudo) | 10.05 | 995.02 |
Romania (Leu) | 1.67 | 6000.00 |
Russia (Rubles) | 10.00 | 1000.00 |
Serbia (Dinar) | 5.00 | 2000.00 |
Slovakia (Koruna) | 8.60 | 1162.79 |
Spain (Pesetas) | 23.58 | 424.09 |
Sweden (Kronor) | 59.52 | 168.01 |
The Netherlands (Guilder) | 13.27 | 753.57 |
Greece, July to October 1943
The status reports of 1. Panzer-Division, which was stationed in Greece from July to October 1943, provides an excellent insight into the financial exploitation of Greece in particular, and of occupied countries in general, by the German army. Note above that, on 15 April 1942, the exchange rate was 1 to 60.
The soldiers' morale is excellent, and they are enthusiastic. Part of the reason for this is the low exchange rate for Drachmas, which the troops do not fully comprehend. […]
Status Report, 1 July 1943
The soldiers' morale is very good, and they are enthusiastic. The increase of the exchange rate for Drachmas from 1 to 600 to 1 to 1200 has been very beneficial. […]
Status Report, 1 August 1943
The soldiers' morale is good, and they are enthusiastic. The increase of the exchange rate for Drachmas to 1 to 2400, as well as the small increase in vacation quotas, have been beneficial. […]
Status Report, 1 October 1943
Sources
- Die Wehrausgaben von 1935 (ausschl. Ergänzungskredite) in Landeswährung und RM. Berlin, 1939. 1 p. NARA T78 R149.
- Wehrwirtschaftliches Unterrichtsmaterial Heft 7 - Das Devisenrecht der deutschen Wehrmacht - Grundriß. 1942. 45 p. NARA T78 R862 H37/81.
- Meldung vom 1. Oktober 1943. 1. Panzer-Division, 1943. 3 p. 1.Pz.Div. Ia Nr. 766/43 g.Kdos. NARA T78 R616.
- Meldung vom 1. August 1943. 1. Panzer-Division, 1943. 4 p. 1.Pz.Div. Ia Nr. 660/43 g.Kdos. NARA T78 R616.
- Meldung vom 1. Juli 1943. 1. Panzer-Division, 1943. 4 p. 1.Pz.Div. Ia Nr. 582/43 g.Kdos. NARA T78 R616.
- Busch, Ernst. Sonderbestimmungen für die Verwaltung und Befreidung der besetzten Gebiete Belgiuns und Luxemburgs. Armeeoberkommando 16, 1940. 20 p. AOK 16 Abt. O.Qu. Nr. 85/40 g.Kdos.Ch.Sache. NARA T315 R16.
- Reinecke. Zahlungsregelung für die Wehrmacht in Nordost-, Ost- und Sudosteuropa. Berlin : Oberkommando der Wehrmacht, 1941. 7 p. DHI 500-12450-000090.