新编金融英语教程 Chapter5 Exchange Rate
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on exchange rate. Then it will discuss how the level of exchange rate is determined. Finally, this chapter will introduce foreign exchange markets.
5.2 Key Points
5.2.1 Definition of Exchange Rate
Exchange Rate
The exchange rate is the ratio of the currency of one country to the currency of another country or the price of one currency in another currency.
Given that different currencies in the world have different names and values, it is necessary for countries to set a rate, at which they can exchange their currencies. This rate is called the exchange rate.
We begin by identifying the major factors that can alter demand:
Yen/dollar
100 50
Supply of dollars
A
B
Demand
of
dollars
Demand for dollars after rise in U.S. price
Chapter 5
Exchange Rate
CONTENTS
5.1 L e a d - i n 5.2 K e y Po i n t s 5.3 L a n g u a g e N o t e s 5.4 F o l l o w - u p Ta s k s 5.5 E x t e n d e d Ta s k s
5.3 Language Notes
II. Phrases
• arbitrage profits • assumed inflation • basket of currencies • buying rate • carry trade • credit market • currency exchange • currency substitution • equilibrium exchange rate • exchange rate • fixed exchange rate
Changes in foreign interest rates relative to U.S. interest rates.
5.2 Key Points
5.2.3Changes in Supply and Demand and Their Influences on the Exchange Rate
5.2 Key Points
5.2.2 Types of Exchange Rate
Floating exchange rate A floating exchange rate, which is also called the fluctuating exchange or flexible exchange rate, is a type of exchange-rate regime, in which a currency’s value is allowed to fluctuate in response to foreignexchange market mechanisms.
Supply of dollars
A B
Supply of dollars after rise in U.S. income
Demand of dollars
Changes in U.S. real income
Changes in the dollar price of U.S. goods relative to the dollar price of foreign goods.
a profit in a
5.2.5 Foreign Exchange Markets
The foreign exchange market is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the credit market.
5.3 Language Notes
I. Words
allowance [əˈlaʊəns] 补贴 appreciation [əˌpri:ʃiˈeɪʃn] 升值 arbitrage [ˈɑ:bɪtrɑ:ʒ] 套汇，套利 commission [kəˈmɪʃn] 佣金 depreciation [dɪˌpri:ʃɪ'eɪʃn] 贬值 dollarization [ˌdɒləraɪ'zeɪʃn] 美元化 float [fləʊt] 浮动 forward [ˈfɔ:wəd] 远期合约 impact [ˈɪmpækt] 影响 inflation [ɪnˈfleɪʃn] 通货膨胀 margin [ˈmɑ:dʒɪn] 保证金，利润，盈余 peg [peg] 固定，盯住 parity [ˈpærəti] 平价，价值对等 quote [kwəʊt] 报价 retail [ˈri:teɪl] 零售 speculation [ˌspekjuˈleɪʃn] 投机活动，投机买卖 spot [spɒt] 现货
Fixed exchange rate A fixed exchange rate is a type of exchange rate regime, where a currency’s value is fixed against either the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold.
5.1Lead-in
This chapter will first of all look at the definition and types of exchange rate. Then it will talk about the changes in supply and demand and their influences
• floating exchange rate • foreign currency • foreign currency deposit • foreign reserve • full currency substitution • gold standard • hard pegs • soft pegs • international market • legal currency
5.2 Key Points
5.2.3Changes in Supply and Demand and Their Influences on the Exchange Rate
Yen/dollar
100 50
what factors could cause the supply curve of dollars to shift?
5.2 Key Points
5.2.3Changes in Supply and Demand and Their Influences on the Exchange Rate
Yen/dollar 100
Supply of dollars
A
Figure depicts the determination of the equilibrium exchange rate. The foreign exchange market “clears” at the exchange rate where the demand and supply curves intersect. At this exchange rate, the quantity demanded of dollars/month is equal to the quantity supplied of dollars/month, and we have market equilibrium (at point A). At any other exchange rate, there is either a surplus or a shortage of dollars. Market forces generated by the surplus or shortage will cause changes in the exchange rate, which will continue until equilibrium is reached.
The theory of Interest Rate Parity (IPR)
The theory of Interest Rate Parity (IPR) theory is used to analyze the relationship between the spot rate and a corresponding forward (future) rate of currencies. The IPR theory states interest rate differentials between two different currencies will be reflected in the premium or discount for the forward exchange rate on the foreign currency if there is no arbitrage - the activity of buying shares or currency in one financial market and selling it at
Changes in foreign real income.
Changes in the foreign (yen) price of foreign goods relative to the foreign price of U.S. goods.
Changes in U.S. interest rates relative to foreign interest rates.
5.2 Key Points
5.2.4 Determination of the Level of Exchange Rate
PPP
The theory of purchasing power parity（PPP）
The theory states that the exchange rate between two currencies is equal to the ratio of the currencies’respective purchasing power. Theories that invoke purchasing power parity assume that in some circumstances (for example, as a long-run tendency) it would cost exactly the same number of.
5.2 Key Points
5.2.1 Definition of Exchange Rate
Exchange Rate
The exchange rate is the ratio of the currency of one country to the currency of another country or the price of one currency in another currency.
Given that different currencies in the world have different names and values, it is necessary for countries to set a rate, at which they can exchange their currencies. This rate is called the exchange rate.
We begin by identifying the major factors that can alter demand:
Yen/dollar
100 50
Supply of dollars
A
B
Demand
of
dollars
Demand for dollars after rise in U.S. price
Chapter 5
Exchange Rate
CONTENTS
5.1 L e a d - i n 5.2 K e y Po i n t s 5.3 L a n g u a g e N o t e s 5.4 F o l l o w - u p Ta s k s 5.5 E x t e n d e d Ta s k s
5.3 Language Notes
II. Phrases
• arbitrage profits • assumed inflation • basket of currencies • buying rate • carry trade • credit market • currency exchange • currency substitution • equilibrium exchange rate • exchange rate • fixed exchange rate
Changes in foreign interest rates relative to U.S. interest rates.
5.2 Key Points
5.2.3Changes in Supply and Demand and Their Influences on the Exchange Rate
5.2 Key Points
5.2.2 Types of Exchange Rate
Floating exchange rate A floating exchange rate, which is also called the fluctuating exchange or flexible exchange rate, is a type of exchange-rate regime, in which a currency’s value is allowed to fluctuate in response to foreignexchange market mechanisms.
Supply of dollars
A B
Supply of dollars after rise in U.S. income
Demand of dollars
Changes in U.S. real income
Changes in the dollar price of U.S. goods relative to the dollar price of foreign goods.
a profit in a
5.2.5 Foreign Exchange Markets
The foreign exchange market is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the credit market.
5.3 Language Notes
I. Words
allowance [əˈlaʊəns] 补贴 appreciation [əˌpri:ʃiˈeɪʃn] 升值 arbitrage [ˈɑ:bɪtrɑ:ʒ] 套汇，套利 commission [kəˈmɪʃn] 佣金 depreciation [dɪˌpri:ʃɪ'eɪʃn] 贬值 dollarization [ˌdɒləraɪ'zeɪʃn] 美元化 float [fləʊt] 浮动 forward [ˈfɔ:wəd] 远期合约 impact [ˈɪmpækt] 影响 inflation [ɪnˈfleɪʃn] 通货膨胀 margin [ˈmɑ:dʒɪn] 保证金，利润，盈余 peg [peg] 固定，盯住 parity [ˈpærəti] 平价，价值对等 quote [kwəʊt] 报价 retail [ˈri:teɪl] 零售 speculation [ˌspekjuˈleɪʃn] 投机活动，投机买卖 spot [spɒt] 现货
Fixed exchange rate A fixed exchange rate is a type of exchange rate regime, where a currency’s value is fixed against either the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold.
5.1Lead-in
This chapter will first of all look at the definition and types of exchange rate. Then it will talk about the changes in supply and demand and their influences
• floating exchange rate • foreign currency • foreign currency deposit • foreign reserve • full currency substitution • gold standard • hard pegs • soft pegs • international market • legal currency
5.2 Key Points
5.2.3Changes in Supply and Demand and Their Influences on the Exchange Rate
Yen/dollar
100 50
what factors could cause the supply curve of dollars to shift?
5.2 Key Points
5.2.3Changes in Supply and Demand and Their Influences on the Exchange Rate
Yen/dollar 100
Supply of dollars
A
Figure depicts the determination of the equilibrium exchange rate. The foreign exchange market “clears” at the exchange rate where the demand and supply curves intersect. At this exchange rate, the quantity demanded of dollars/month is equal to the quantity supplied of dollars/month, and we have market equilibrium (at point A). At any other exchange rate, there is either a surplus or a shortage of dollars. Market forces generated by the surplus or shortage will cause changes in the exchange rate, which will continue until equilibrium is reached.
The theory of Interest Rate Parity (IPR)
The theory of Interest Rate Parity (IPR) theory is used to analyze the relationship between the spot rate and a corresponding forward (future) rate of currencies. The IPR theory states interest rate differentials between two different currencies will be reflected in the premium or discount for the forward exchange rate on the foreign currency if there is no arbitrage - the activity of buying shares or currency in one financial market and selling it at
Changes in foreign real income.
Changes in the foreign (yen) price of foreign goods relative to the foreign price of U.S. goods.
Changes in U.S. interest rates relative to foreign interest rates.
5.2 Key Points
5.2.4 Determination of the Level of Exchange Rate
PPP
The theory of purchasing power parity（PPP）
The theory states that the exchange rate between two currencies is equal to the ratio of the currencies’respective purchasing power. Theories that invoke purchasing power parity assume that in some circumstances (for example, as a long-run tendency) it would cost exactly the same number of.