EXCHANGE RATES

Exchange Rates

Exchange Rates

Introduction

Every day, companies around the world and millions of individuals are involved in business transactions around the world. Typically, these transactions involve two or more currencies. Exchange rates generally increase international trade and particularly international investment by reducing the risk of currency fluctuation in those transactions. Fixed exchange rates also often reduce the risk of inflation and generally increase the stability of the money supply. An independent financial policy allows counter-cyclical management of the economy, and will also allow some control of exchange rates if used in a system without fixed rates. The basics however, were the in any time period. On the other perspectives we will have a look at the country's most important building block, its currency and thus which currency choice it chooses in order to adopt, changed considerably across the two time periods.

Effects on Trade

The change in exchange rate can directly affect the exchange rates, inflation as well as interest rates of the country. During the 1990s, Asian economies focused on increasing integration with the global economy and financial system, adopting Washington Consensus policies that supported economic and financial liberalization. In addition, economic interactions within the region, especially trade and investment, began to increase.

Simultaneously role of finance in the Asian growth model set the stage for the Asian financial crisis of 1997-98. The global financial and economic crisis that commenced in 2007 marks another important turning point in Asia's development. In the wake of the crisis—with its main impact in the region, to date, resulting from the collapse in trade to developed markets in 2008-09—regional consensus has shifted to support economic rebalancing away from strategies dominated by exports to Europe and the United States (US), and toward more balanced domestic economies and better economic relationships regionally and internationally. (Manzur, 2003)

US VS Rest ...