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International Finance Archives - Page 5 of 28 - MBA Knowledge Base

The Development of the Eurodollar Market

Euro Markets are unregulated Money and Capital markets. These markets are spread over  Europe, Middle East and Asia. Short-term Euro markets are called as “Euro- currency  Markets”. Any currency held outside to home country is referred to as Euro-currency. For  example when a Dollar is held as a deposit outside the U.S. is  referred  to as Euro-Dollar,  Similarly a deposit in Marks, outside Germany is called as a Euro-Mark deposit.

The Dollar was and still is widely used to settle the international payments. Although  there is an increase in European Deposits, denominated in Euro, Pound  sterling, Yen etc.,… Read the rest

Gold Backed Currency System

If the monetary authority holds sufficient gold to convert all circulating money, then this is  known as a 100% reserve gold standard, or a full gold standard. Some believe there is no  other form of gold standard, since on any “partial” gold standard the value of circulating  representative paper in a free economy will always reflect the faith that the market has in that  note being redeemable for gold. Others, such as some modern advocates of supply-side  economics contest that so long as gold is the accepted unit of account then it is a true gold  standard.  In an internal gold-standard system, gold coins circulate as legal tender or paper money is  freely convertible into gold at a fixed price.… Read the rest

The Benefits of a Single Currency System – Euro

The euro is the result of the most significant monetary reform in Europe since the Roman  Empire. Although the euro can be seen simply as a mechanism for perfecting the Single  European Market, facilitating free trade among the members of the Euro-zone, it is also  regarded by its founders as a key part of the project of European political integration.

The euro is administered by the European System of Central Banks (ESCB), composed of the  European Central Bank (ECB) and the Euro-zone central banks operating in member states.  The ECB (headquartered in Frankfurt am Main, Germany) has sole authority to set monetary  policy; the other members of the ESCB participate in the printing, minting and distribution of  notes and coins, and the operation of the Euro-zone payment system.… Read the rest

International Equity Investments – Euro Equities

International equities or the Euro equities do not represent debt, nor do they represent  foreign direct investment. They are comparatively a new financial instruments representing foreign  portfolio equity investment. In this case, the investor gets the dividend and not the interest as  in case of debt instruments. On the other hand, it does not have the same pattern of voting  right that it does have in the case of foreign direct investment. In fact, international equities  are a compromise between the debt and the foreign direct investment. They are the  instruments that are presently on the preference list of the investors as well as the issuers.… Read the rest

Demand and Supply for Foreign Exchange

The foreign exchange rate is determined in the free foreign exchange  markets by the forces of ‘demand and supply for foreign exchange’. To make  the demand and supply functions to foreign exchange, like the conventional  market demand and supply functions, we define the rate of exchange as the price  of one unit of the foreign currency expressed in terms of the units of the home  currency.

The Demand for Foreign Exchange

Generally, the demand for foreign currency arises from the traders who  have to make payments for imported goods. If a person wants to invest his  capital in foreign countries, he requires the currency of that country.… Read the rest

Theories of Foreign Exchange

Every country has a currency different from others. There is no common  medium of exchange. It is this feature that distinguishes international trade  from domestic. Suppose the imports and exports of a country are equal, the  demand for foreign currency and its supply conversely, the supply of home  currency and the demand for it will be equal. The exchange will be at par.  If the supply of foreign money is greater than the demand it will fall below  par and the home currency will appreciate. On the other hand, when the  home currency is in great supply, there will be more demand for the foreign  currency.… Read the rest