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POLC99H3 (33)

Lecture 05 Notes

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Political Science
Norla Carloff

Multilateral Cooperation and Financial Markets Lecture 05 Foreign Exchange (FEX) Market 1 base currency# quote currency, e.g., $ is the dollar value of 1 Euro o Extremely liquid buyers and sellers at all times o This is true during high volatility as well o Mortgage are deep large quantities have to be sold in order to affect the marketing o Open 247 Twin prices o Quoted prices allows us to analyze reciprocal prices Crash proof o Reciprocity disallows crashes o When one decreases the other increases; hence no crash o Most of the foreign exchange market turnover occurs in the United Kingdon o USD is the currency most traded International Role of the Dollar: Vehicle currency reduces transaction costs o Trading goods and assets would be costly if the currency of each partner had to be accepted at each sale o Vehicle currencies are used to comba
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