brief introduction of foreign exchange market.ppt

The Global Monetary System —the Foreign Exchange Market Contents Case The Nature of foreign exchange market The Function of foreign exchange market Economic Theories of exchange rate determination Exchange rate forecasting Case Hyundai and Kia Face a Strong Won Low price strategy In 2006, the won rose in value by about 7 percent against the U.S. dollar, which meant that Hyundai and Kia vehicles sold in the U.S. for dollars were recorded at a lower value when translated back into won and hurt the financial performance of both companies. The Nature of the foreign exchange market The foreign exchange market is a market for converting the currency for one country into that of another country. Exchange rate is the rate at which one currency is converted into another. It is not located in any one place. It is a global network of banks, brokers, and foreign exchange dealers connected by electronic communications systems. Most important trading centers: London, New York, Tokyo, Singapore Major secondary trading center Zurich, Frankfurt, Paris, Hong Kong, Sydney The Nature of the foreign exchange market Three features: 1.the market never sleeps. 2.The market is the integration of the various trading centers. It implies that there can be no significant difference in exchange rates quoted in the trading centers. 3.the important role played by the U.S. dollar. After the dollar, the most important vehicle currencies were the euro, the Japanese yen, and the British pound——reflecting the importance of the trading centers in the world economy. Function THE FIRST is to convert the currency of one country into that of another country. Eg: tourists (minor participants), companies engaged in international trade and investments are major ones. International businesses have four main uses of foreign exchange markets 1、The payments and income of a company from business and investment may be in foreign currencies. 2、International