EECS 1019 Lecture Notes - Lecture 34: The Quotations, Spot Contract, Exchange Rate
21 Jun 2018
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EECS 1019 Lecture 34 Notes
Introduction
Interpreting Foreign Exchange Quotations
Exchange rate quotations for widely traded currencies are published daily in the Wall
Street Journal and in business sections of many newspapers.
With a few exceptions, each country has its own currency.
In 1999, several European countries (including Germany, France, and Italy) adopted the
euro as their currency, and more countries, primarily in Eastern Europe, have adopted
the euro since then.
The area containing the countries that have adopted the euro is referred to as the
eurozone.
Currently, the eurozone encompasses 17 European countries.
Direct versus Indirect Quotations at One Point in Time
The quotations of exchange rates for currencies normally reflect the ask prices for large
transactions.
Because these rates change throughout the day, those quoted in a newspaper reflect
only one specific time during the day.
Quotations that report the value of a foreign currency in dollars (number of dollars per
unit of other currency) is referred to as direct quotations
Whereas quotations that report the number of units of a foreign currency per dollar are
known as indirect quotations.
Thus an indirect quotation is the reciprocal (inverse) of the corresponding direct
quotation.
EXAMPLE
The spot rate of the euro is quoted this morning at $1.031.
This is a direct quotation because it represents the value of the foreign currency in
dollars.
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EECS 1019 Full Course Notes
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Document Summary
Exchange rate quotations for widely traded currencies are published daily in the wall. Street journal and in business sections of many newspapers. Direct versus indirect quotations at one point in time. The quotations of exchange rates for currencies normally reflect the ask prices for large transactions. Whereas quotations that report the number of units of a foreign currency per dollar are known as indirect quotations. This is a direct quotation because it represents the value of the foreign currency in dollars. The indirect quotation of the euro is the reciprocal of the direct quotation: indirect quotation 1=direct quotation 1=:031 :97. Rate quotations for widely traded currencies are published daily in the wall street. Journal and in business sections of many newspapers. With a few exceptions, each country has its own currency. In 1999, several european countries (including germany, france, and italy) adopted the euro as their currency, and more countries, primarily in eastern europe, have adopted the euro since then.
