History of Exchange Rate

Topics: Bretton Woods system, Foreign exchange market, Monetary policy Pages: 3 (909 words) Published: May 12, 2013
Assignment on History of Exchange Rate

Prepared for
Ms. Rafia Afrin
Course Title: International Finance
Course Code: F603

Prepared By
H. M. Shahriar Hassan
Roll: 05

Institute of Business Administration
University of Dhaka
March 19, 2013
History of Exchange Rate
Exchange Rate:
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency. The foreign exchange market allows currencies to be exchanged in order to facilitate international trade or financial transactions. History:

The system for establishing exchange rates has evolved over time. Gold Standard:
From 1876 to 1913, each currency was convertible into gold at a specified rate, as dictated by the gold standard. The gold standard is a monetary system where the standard economic unit of account is based on the fixed weight of gold. There are three distinct types of "gold standards". The gold specie standard is a system in which the monetary unit is associated with the value of circulating gold coins or has the value of a certain circulating gold coin along with other coins made of less valuable metal. The gold exchange standard usually does not involve the circulation of gold coins. The main feature of the gold exchange standard is that the government guarantees a fixed exchange rate with another country that does use the gold standard (specie or bullion), regardless of what type of notes or coins are used as a means of exchange. This creates a de facto gold standard, where the value of the means of exchange has a fixed external value in terms of gold that is independent of the inherent value of the means of exchange itself. Finally, the gold bullion standard is a system in which gold coins do not circulate, but the authorities agree to sell gold bullion on demand at a fixed price in exchange for circulating currency. This was followed by...
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