The aim of this essay is to understand the problem of exchange rate. In order to answer to this problematic, various topics will be analysed. First, the concept of exchange rate will be defined to understand well the topic, then a summary of the movements of the four most used currencies, Dollar, Euro, GBP and Yen and theirs exchange rates over one year. In a second part, the main factors which play a huge role in the fluctuation will be explain and, more precisely, an explanation on the movement that appeared on the graph of the first part. Finally, a brief commentary about Elecdyne’s recommendation to sell from a country to another.
Let’s start with the definition of exchange rate. According to investorwords.com, it means «Rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another (such as for the purposes of travel to another country), or for engaging in speculation or trading in the foreign exchange market.» Thus, the exchange rates movement are very important and have to be monitoring in order to avoid cash loss.
In order to study the exchange rates movement, the currencies will be analysed over a year, one with the others. The period of time is from October 2009 to OCtober 2010.
Evolution of the GBP:
[pic]Let’s start with GBP. On this graph showing the movement between Euro and GBP, the curve’s trend is increasing from october to July with a quick acceleration at the end. Then the curve is stable until October where it decreases. The highest point is in July and the lowest in October 2009. It means that at the beginning of the year, British should have invested in Euro countries. [pic]
On this graph showing the movement between USD and GBP, the value is decreasing from October 2009 to May/ June 2010. Then, the curve increases to catch up almost the value at the beginning of the year. The lowest point was in May 2010 and the highest one was in November 2009. For British investors, the best period to buy or invest was at the beginning of the year. [pic]
This curve shows the relation between the Japanese Yen and the British pound which is only decreasing during the year. It means that the GBP looses its value. The lowest level reached at the end of september and the highest point in October 2009. It means that it wasn’t a good year for British to invest in Japan this year.
The evolution of Euro.
Let’s continue with the Euro. This curve has not the same trend as the previous one, from October to June, the curve is decreasing, with a massive one in May/June. Then, it increases with a little fall until October 2010. The highest point is in December and the lowest one is in June. For European investors, the most profitable period of time was at the beginning of the year to trade in the Dollar market. After January, it’s not really a good investment. [pic]
This graph shows the evolution between GBP and Euro. The curve’s trend is to decrease along the year. But in september, Euro looses a little of its value so it becomes higher. The lowest point is reached in July and the highest in October 2009. [pic]
This graph is quiet like the two other graphs about Euro, which means that the trend is to decrease over the year with fast decrease, even if at the end of the year it starts again but not big as the beginning. The lowest point...