Bloomberg Market Concepts: Currencies
Module UPDATED Study Guide
QUESTIONS AND CORRECT ANSWERS
BBerg: How to see database of trade flows between major countries -
CORRECT ANSWERS Type "trade flow" into command line and select
ECTR
US only imported $5B goods from China in mid-1980's, $85B from Japan
(1986, top 15 importers to US) - CORRECT ANSWERS
30 years later, China main source of imports to the US ($482B) - CORRECT
ANSWERS
KNOWLEDGE CHECK: As outwards facing bar highest for US..... -
CORRECT ANSWERS US has highest imports
Dealing with currencies used to be straightforward because - CORRECT
ANSWERS They used to have predetermined, locked exchange rates. In
wake of "Bretton Woods Agreement," sealed by WW2 allies in NH, USA, they
all agreed to lock their currencies to the US dollar. The US dollar in turn was
convertible to gold at price of $35/ounce, with gold available at Fort Knox,
Kentucky (aka "gold standard")
During Vietnam War, US economy stagnated and attempt to lock currencies
ended when Nixon suspended convertibility of US dollar into gold. This
decision created the modern fiat currency regime. Today, more than $5T is
transacted daily in foreign exchange markets, aka FX or forex markets.
Unlike other markets, currency market operates __ hours in a day - CORRECT
ANSWERS 24
, Approximately _____ weeks worth of global currency transactions amounts to
world annual GDP - CORRECT ANSWERS three
3 main entities that trade currencies (in descending order of volume) -
CORRECT ANSWERS 1. Financial investors (buying/selling securities
in foreign currencies, 45% of volume)
2. Corporations (conducting global business selling goods/services across
borders.)
3. Travelers (business/leisure trips leading to change currency for personal use)
PEG function - CORRECT ANSWERS Used to see currencies which
are pegged to other countries' currency values (e.g. Hong Kong dollar pegged to
USD at 7.8 Hong Kong dollars)
Most liquid currency - CORRECT ANSWERS US dollar
How can a government promise a fixed exchange rate to its businesses and
consumers? - CORRECT ANSWERS One key mechanism many
governments use to peg currencies is called FX reserves, huge stack of cash
with which to manipulate supply of and demand for currency and therefore
manipulate its value. The USD is the most common currency used to build FX
reserves as it is the most liquid currency.
If peg is artificially strong, these large FX reserves may be needed to shore up
the currency at the pegged level. Oftentimes with pegged currencies, gov. fails
to convince market that currency should be as strong as peg. Overall, currency
values still determined by law of supply and demand.
Module UPDATED Study Guide
QUESTIONS AND CORRECT ANSWERS
BBerg: How to see database of trade flows between major countries -
CORRECT ANSWERS Type "trade flow" into command line and select
ECTR
US only imported $5B goods from China in mid-1980's, $85B from Japan
(1986, top 15 importers to US) - CORRECT ANSWERS
30 years later, China main source of imports to the US ($482B) - CORRECT
ANSWERS
KNOWLEDGE CHECK: As outwards facing bar highest for US..... -
CORRECT ANSWERS US has highest imports
Dealing with currencies used to be straightforward because - CORRECT
ANSWERS They used to have predetermined, locked exchange rates. In
wake of "Bretton Woods Agreement," sealed by WW2 allies in NH, USA, they
all agreed to lock their currencies to the US dollar. The US dollar in turn was
convertible to gold at price of $35/ounce, with gold available at Fort Knox,
Kentucky (aka "gold standard")
During Vietnam War, US economy stagnated and attempt to lock currencies
ended when Nixon suspended convertibility of US dollar into gold. This
decision created the modern fiat currency regime. Today, more than $5T is
transacted daily in foreign exchange markets, aka FX or forex markets.
Unlike other markets, currency market operates __ hours in a day - CORRECT
ANSWERS 24
, Approximately _____ weeks worth of global currency transactions amounts to
world annual GDP - CORRECT ANSWERS three
3 main entities that trade currencies (in descending order of volume) -
CORRECT ANSWERS 1. Financial investors (buying/selling securities
in foreign currencies, 45% of volume)
2. Corporations (conducting global business selling goods/services across
borders.)
3. Travelers (business/leisure trips leading to change currency for personal use)
PEG function - CORRECT ANSWERS Used to see currencies which
are pegged to other countries' currency values (e.g. Hong Kong dollar pegged to
USD at 7.8 Hong Kong dollars)
Most liquid currency - CORRECT ANSWERS US dollar
How can a government promise a fixed exchange rate to its businesses and
consumers? - CORRECT ANSWERS One key mechanism many
governments use to peg currencies is called FX reserves, huge stack of cash
with which to manipulate supply of and demand for currency and therefore
manipulate its value. The USD is the most common currency used to build FX
reserves as it is the most liquid currency.
If peg is artificially strong, these large FX reserves may be needed to shore up
the currency at the pegged level. Oftentimes with pegged currencies, gov. fails
to convince market that currency should be as strong as peg. Overall, currency
values still determined by law of supply and demand.
