Intro to Business

Topics: United States dollar, Currency, Foreign exchange market Pages: 1 (576 words) Published: October 21, 2014

1) First, describe in your own words the significance and differences in foreign currency exchange rates. Foreign Currency Exchange Rate is significant because it’s the way a country exchanges one currency for another. It can also be referred to simply as an exchange rate. Foreign Currency Exchange is important because it determines the value of foreign investments. Importing and exporting is greatly affected in each country by the rate at which goods and supplies are sold. This in turn affects the country’s financial health and stability. At times when the currency value changes significantly investment is highly discouraged whether it’s low or extremely high and stable. However, if the foreign exchange rate is stable and low, investment is encouraged. There are three different types of Foreign Currency Exchanges rates, Floating Rates, Fixed Rates and Pegged Rates. Floating Rates are the main type of foreign exchange rate. This rate is why there are currency fluctuations in the foreign markets. This type of exchange rate is found in developed countries. Fixed Rates are rates in developing countries that are small in size. They use this type of exchange rate to stir up trade activity in the country as well as aid with foreign investments. Lastly, Pegged Rates are made up of the first two rates, floating and fixed. This type of exchange rate adjusts periodically, but only within a certain range. This type of rate is useful in countries who are trying to develop their economy. Without foreign currency exchange rates global markets would not exist nor would countries be able to grow and develop. Countries need to be able to export and import in order to keep their currency and economies stimulated. All markets and countries around the world rely on foreign currency exchange rates. Sometimes when the rates are low some countries jump on the opportunity to buy more, invest more and sometimes sell off what they don’t need. This can stimulate the country in a...
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