Respond to the following discussion posts with 100 words each and one citation for back-up. Thank you!
The foreign exchange market is an online market where traders can buy and sell currencies. The foreign exchange market has no physical location and opens on Sunday at 5pm est to 4pm est on Friday. During the time the exchange market is open it operates 24/7. The exchange rates change base on supply and demand for everyone. The profit to be made for everyone is determined based on the supply and demand. The foreign exchange market is not truly regulated and is very flexible to the point that there was an issues 5 years ago. A few banks colluded together to influence the rate of exchange. These banks were fined for doing what they did. The foreign exchange market can do over 6.6 billion dollars in one day and is one of the biggest markets. The foreign exchange market has 2 tiers and the top tier determines currency rate. The top tier consists of the big banks with big trades while the 2nd tier consists of companies and people. The United States and China are currently on the verge of making a deal and that is affecting the foreign exchange market. The US. dollar is at an all time 5 month peak high as we approach the trade deal. China and the United States are slowly getting rid of trade tariffs between the 2 countries even though they still have many differences viewed on the topic. The foreign exchange market is and can be easily influenced.
During this weekâ€™s readings we learned about exchange-rate arrangements (Ch 10). We learn that one country may look at the value of their money as something different than another and that when things are traded; i.e. services or products, they may represent different monetary value in each country.
So, for this weekâ€™s discussion post I chose to read about exchange-rate arrangements that were occurring in the world. One example is the changes that were implemented as of February 4, 2019. â€œThe Federal Reserve Board will change the methodology used to construct the trade-weighted dollar indexes in the H.10, G.5, and G.5A releases.â€ (Board of Governors of the Federal Reserve System, 2019)These should improve the alignment of the currency weights with the current U.S. trade patterns. The new index weight will also be based on trades in both goods and services. The Federal Reserve Board will however release the old dollar indexes based solely on goods trade until December 31, 2019 and be referred to as Broad goods only, Major-goods only, and OITP- goods only. (Board of Governors of the Federal Reserve System, 2019)
Itâ€™s good to look at dollar indexâ€™s and trade value of companies. This allow you to see where the company sits compared to comparable companies. As well as let, you see what one company may be worth in U.S. dollars compared to another and see if they are worth more or less in another company with comparable products. This information can be used when trying to decide many things, such as whether they should outsource or not.