Exchange rate- The price of one country's currency in terms of
another's.
from University of Toronto economics
http://www.chass.utoronto.ca/~reak/glosslist.htm#Economic
EXCHANGE RATES AND INFLATION/ GROWTH
Basic econonomic theory teaches us that if the supply of a good
increases, and nothing else changes, the price of that good will
decrease. If the supply of a country's currency increases, we should
see that it takes more of that currency to purchase a different
currency than it did before. Suppose there was a big jump in the
supply of the Canadian dollar. We would expect to see the Canadian
dollar become less valuable relative to other currencies. So the
Canadian-to-U.S. Exchange rate should decrease, from 67 cents down to,
say, 50 cents. Each Canadian dollar would give us less American
dollars than it did before. Similarly, the U.S.-to-Canadian exchange
rate would increase from $1.49 to $2.00, so each U.S. dollar would
give us more Canadian dollars than it did before, as a Canadian dollar
is less valuable than it used to be.
A Beginner's Guide to Exchange Rates and the Foreign Exchange Market
by by Mike Moffatt
http://economics.about.com/library/weekly/aa022703c.htm
INTEREST RATES AND EXCHANGE RATES
Changes in interest rates can have a drastic effect on exchange rates.
Investors interested in purchasing a security that pays interest, such
as a bond, will buy the bond that gives them the highest interest
rate, all else being equal.
http://economics.about.com/library/weekly/aa022703g.htm
The above is just a small slice of the info available from this site.
Detailed case studies and analysis on exchange rates are included in
"A Beginner's Guide to Exchange Rates and the Foreign Exchange Market"
by Mike Moffatt.
http://economics.about.com/library/weekly/aa022703a.htm |
