U.S. Dollar and Euro Presented by: Mayra Duque Brian Truong. Determinants of Exchange Rates Consider Current USD/Euro Trend Past Trend of USD/Euro. Impact of Exchange Rates Factors of International Currencies Outlook for Both Currencies. Purpose. Trade imbalances power parity
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Consider Current USD/Euro Trend
Past Trend of USD/Euro
Impact of Exchange Rates
Factors of International Currencies
Outlook for Both CurrenciesPurpose
(restrictions, non-tradable, imperfect competition, and trade imbalances)
Higher relative interest rates = more demand
Higher relative inflation = less demand
Foreign exchange traders
Return on investmentDeterminants of the Exchange Rate
Source Data: FTD – U.S. Census Bureau
Source data: European Central Bank, Federal Reserve websites
Source Data: European Central Bank, U.S. Bureau of Labor Statistics websites
Data Source: www.msn.com
-1,9747.7 € mi.
We expect the U.S. dollar to continue to depreciate against the Euro.
Issuance of seignorage
Save transaction costs
More business for financial institutions
Convenience for citizens
Political power and prestige
Domestic products more expensive
Domestic currency circulating abroad cannot be controlled
Burden of responsibilityInternational Currencies Cont.
Move away from pegging to the dollar
Commodities like oil are invoiced in other
Asian countries financial/monetary cooperation
If enough EU members
If dollar keeps depreciating and inflation decreases confidence
Foreign Central Banks hold U.S. reservesEnd of U.S. Hegemony?