Now take a look at the chart, which plots a foreign exchange rate along with a price index for the global stock market.
Holders of precious metals or other major tradable (fungible) assets worldwide need to monitor the foreign exchange rate of the currency in which their asset is held.
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Prior to her dismissal, Ms Dastjerdi said that because of the rise in the foreign exchange rate, there would be an inevitable increase in the price of medicine.
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Most of the risk in Brazil stems from political interference in the economy through a myriad of surprise macro measures such as taxation on investment, to monetary policy related to the foreign exchange rate.
The Tuesday tariff is yet another measure aimed at protecting local industry following sector-specific tax incentives (like the auto industry) and a more aggressive intervention policy to maintain the foreign exchange rate between the U.S. dollar and the Brazilian real at weak levels.
Typically, one series of cash flows would be considered the fixed leg of the agreement while the other would be less predictable, such as cash flows based on an interest rate benchmark or a foreign exchange rate, usually referred to as the floating leg.
It seems the Ministry of Finance has ceded foreign exchange rate policy back to the Central Bank where it belongs. the bank has, for now, won the policy argument that further weakening of the real will be inflationary and lead to a stronger real exchange rate, says Tony Volpon, managing director at Nomura Securities in New York.
But in order to function properly, to function at an acceptable level of dysfunction, command systems need to exert an extraordinary degree of control over economic life: they need to control foreign travel, they need to restrict residency patterns and limit internal migration, they need to fix prices, they need to arbitrarily set a foreign exchange rate, and they need to place extreme restrictions on foreign trade.
While platinum prices have fallen in dollar terms over the last few months, fluctuations in the foreign-exchange rate between the U.S. dollar and South African rand have actually meant South African mining companies are effectively receiving a higher payment for their metal, Tremblay said.
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And in some cases a bank decides on its own to hold on to a transfer in the hope of getting a better foreign-exchange rate for the customer the following day, or in order to batch it with other transfers and so lower its costs.
Indeed, studies have shown that even when emerging-market economies say they are floating (as Malaysia, for example, used to), they tend to rely more heavily than the industrial countries do on interest-rate policy and foreign-exchange market intervention to limit actual movements in the exchange rate.
His own reforms, such as introducing a simplified, single-rate foreign-exchange mechanism, private banks and mobile phones, remain on the drawing-board.
After intense negotiating, the Lincoln provision was watered down to allow interest rate and foreign exchange swaps dealing to remain inside a commercial bank.
Banks will still be able to trade swaps to hedge risk and trade interest rate or foreign exchange swaps, but dealing in riskier swaps transactions must still be moved into affiliates.
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In a bid to offset the impact of sterling's rise and remain competitive with duty-free shops abroad, Heathrow's shops are offering travellers who pay in various foreign currencies a more favourable exchange rate than the current market rate.
If a central bank buys foreign currency to hold down the exchange rate of the domestic currency, it creates more domestic money.
In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy.
In developing countries with immature financial markets, a freely floating exchange rate may not be sensible because a small number of foreign-exchange trades can cause big swings in currencies.
Some economists are expecting wider fluctuation of the exchange rate due to uncertain foreign capital flow.
But as an alternative, Mr Smithers points out, it can still target the exchange rate the foreign price of money.
It could make even the biggest markets foreign exchange, government bonds, interest-rate swaps less liquid.
Areas such as interest-rate swaps and foreign-exchange trading incur large fixed costs.
Given the losses they have already suffered through the pound's fall, will they step up their purchases, especially as the growth rate of global foreign-exchange reserves is slowing?
The central bank had tried selling the currency at that level on the interbank market for foreign currency, which is how its exchange rate is normally determined, but gave up when no one would buy it.
The obvious policy response is intervention to cap the sterling rate, build up foreign-exchange reserves, and offset the monetary effects by issuing sterling debt.
Under a currency board arrangement, the central bank guarantees the redemption of all notes in circulation at a set exchange rate to the dollar or another foreign currency or basket of currencies.
Even America, with least to worry about in this respect (because of the size of its economy), has a policy of sorts on the dollar's value including attempting to push the rate around by means of foreign-exchange intervention.
Most have abandoned their old exchange-rate pegs, are running large current-account surpluses, and have built up ample foreign-exchange reserves.
When, after a few days, it allowed foreign-exchange dealings to resume, it insisted on a rate of 180 kyat to the dollar.
The paradox is that part of the euro's purpose is to re-empower the European electorate by equipping the EU with a currency strong enough to challenge the rule of the tiny group of foreign-exchange dealers who, in a floating exchange-rate regime, can settle the fate of national economic policies.
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