INTL BUS 200 Lecture Notes - Lecture 1: Foreign Exchange Spot, Exchange Rate, Capital Flight
3 Apr 2018
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Document Summary
Extent to which foreign exchange movements may affect income/costs on current company obligations, such as receipt of revenue or payments due in foreign currency. Long-run effect of changes in exchange rates on future revenue/cost. The effect of exchange rate changes on currently open transactions, most of which will be executed within few months. Globally traded currency that serves as a reliable/stable store of value. Stability/deep financial pools that back them/reserve asset for other gov. Currency"s value is set against another single currency. Stabilize the value of a currency against the currency its pegged to. Remove foreign risk, impose discipline on the government issuing the pegged currency, as they must manage the economy to support the rate and cannot engage in policies that cuase competitive devaluations. Diminish speculation by foreign exchange traders and others who may try to destabilize a currency. Service international debt the government may have outstanding. Make international purchases on behalf of the government.
