Greetings PBP!
We can easily determine the exchange ratio by looking at how each
currency stacked up against the US dollar on those dates.
GUILDERS/US$
27-Apr-78 2.2036
source: US Federal Reserve
http://www.federalreserve.gov/releases/H10/hist/dat89_ne.txt
$US/POUND STERLING
27-Apr-78 1.8330
source: US Federal Reserve
http://www.federalreserve.gov/releases/H10/hist/dat89_uk.txt
Now, we can simply multiply to remove the dollars from the equation...
2.2036 GUILD. 1.8330 US DOLLAR
------------- X ---------------- = 4.0391988 GUILDERS/POUND
1 US DOLLAR 1 POUND STERLING
Rounding off, figure about 4.04 Guilders to the Pound on 27 April
1978.
--------------
The pre-Euro Conversion date was 31 December 1998.
Source: European Central Bank
http://www.ecb.int/change/conversion.htm
Going back to the Federal Reserve...
GUILDERS/US$
31-Dec-98 1.8770
source: US Federal Reserve
http://www.federalreserve.gov/releases/H10/hist/dat96_ne.txt
$US/POUND STERLING
31-Dec-98 1.6628
http://www.federalreserve.gov/releases/H10/hist/dat96_uk.txt
1.8770 GUILD. 1.6628 US DOLLAR
------------- X ---------------- = 3.1210756 GUILDERS/POUND
1 US DOLLAR 1 POUND STERLING
Rounding off, figure about 3.12 Guilders to the Pound on 31 December
1998.
------------
Now, you may be asking, how can I be sure that this method will give
me the actual Pound/Guilder exchange rates on those dates?
Well, a simple check on today's rates at Yahoo Finance will
demonstrate that this holds true.
http://finance.yahoo.com/m3?u
Let's take today's rates for Dollars, Pounds, and Swiss Francs
1.335 Swiss F 1.673 US DOLLAR
------------- X ---------------- = 2.233455 S.FRANCS/POUND
1 US DOLLAR 1 POUND STERLING
A Yahoo currency quote verifies that this is 2.23 FRANCS/POUND is the
current rate...
http://finance.yahoo.com/m5?a=1&s=GBP&t=CHF
This method works because "triangular arbitrage" activity pretty much
guarantees it.
Here's a brief explanation from ArbitrageInvestor.com:
"The exchange rate movement will encourage triangular arbitrage
activity until the rates adjust in such a way that there are no
profitable opportunities available. Strong free market forces,
generated by the incentives to make money, will ensure that
equilibrium is restored."
http://www.arbitrageinvestor.com/howitworks.html
Suppose:
2 DOLLARS = 1 POUND STERLING
1 POUND STERLING = 4 GUILDERS
1 DOLLAR = 2 GUILDERS
Obviously, that's equilibrium.
Suppose for a minute that a discrepancy existed (i.e., 1 DOLLAR = 1
GUILDER). All the currency traders would immediately take advantage
of this. They'd take $2 and buy 1 Pound with it. Then they'd take
their 1 Pound and buy 4 Guilders with it. Then they'd take their 4
guilders and buy $4 dollars with it! Voila! They just turned $2 into
$4. Obviously, such a money making machine wouldn't last very long,
but basically there are tiny discrepancies that do exist. Currency
traders take advantage of their brief existence, but by doing so, they
drive the exchange rates back into check.
--------
search strategy:
historical "exchange rates", site:gov
I hope this helps. |
