EECS 1019 Lecture Notes - Lecture 37: Canadian Dollar, Mexican Peso
21 Jun 2018
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EECS 1019 Lecture 37 Notes
Introduction
Source of Exchange Rate Quotations
Discussions of exchange rate movements can be confusing if some comments refer to
direct quotations while others refer to indirect quotations.
For consistency, the examples in this text use direct quotations unless an example can
be clarified by the use of indirect quotations.
Updated currency quotations are provided for several major currencies on Yahoo!’s
website (finance.yahoo.com/currency).
You can select any currency for which you want an exchange rate quotation, and you
can view a trend of the historical exchange rate movements for any currency.
Trends are available for various periods, including 1 day, 5 days, 1 month, 3 months, 6
months, 1 year, and 5 years.
As you review a trend of exchange rates, note carefully whether the exchange rate
quotation is direct (value in dollars) or indirect (number of foreign currency units per
dollar) so that you can properly interpret the trend.
The trend indicates not only the exchange rate’s direction but also the extent to which
the currency has changed over time.
The trend also indicates the range of exchange rates observed within a particular period.
When a currency’s exchange rate is extremely sensitive to economic conditions, its
movements mark out a wider range.
Exchange rate quotations are also provided by many other online sources, including
www.oanda.com.
Some sources provide direct exchange rate quotations for specific currencies and
indirect exchange rates for others
So be sure to check which type of quotation is used for any particular currency.
For example, if a Canadian firm needs Mexican pesos to buy Mexican goods, it wants to
know the Mexican peso value relative to the Canadian dollar.
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Document Summary
Discussions of exchange rate movements can be confusing if some comments refer to direct quotations while others refer to indirect quotations. For consistency, the examples in this text use direct quotations unless an example can be clarified by the use of indirect quotations. Some sources provide direct exchange rate quotations for specific currencies and indirect exchange rates for others. So be sure to check which type of quotation is used for any particular currency. For example, if a canadian firm needs mexican pesos to buy mexican goods, it wants to know the mexican peso value relative to the canadian dollar. The type of rate desired here is known as a cross exchange rate because it reflects the amount of one foreign currency per unit of another foreign currency. The examples in this text use direct quotations unless an example can be clarified by the use of indirect quotations.
