1、Unit ElevenText:Foreign Exchange and Exchange Rate（外汇与汇率）1.Key words2.Foreign exchange market and exchange rate 3.Foreign exchange regimes4.Exchange rate determination5.Translate the following into Chinese6.Questionsforeign currencyforeign exchange marketforeign exchange brokerexchange ratefixed exc
2、hange rate regimeflexible exchange rate regimemanaged exchange rate regimeflow theory of the exchange rateflow supplyflow demandinternational paymentsmonetary theory of the exchange rateportfolio balance theory of the exchange ratesterling-denominated financial liabilitiesfinancial asset2.1 Foreign
3、exchange market2.2 Exchange rateThe foreign exchange market is the market in which the currencies of different countries are exchanged for one another.The foreign exchange market is not a place with market stalls.Instead it is made up of thousands of people all over the worldimporters and exporters,
4、banks and specialists in the buying and selling of foreign exchange called foreign exchange brokers.The sun never sets on the foreign exchange market.Dealers around the world are continually in contact using computers linked by telephones.On any given day,billions of pounds change hands.The price at
5、 which one currency exchanges for another is called a foreign exchange rate.The actions of the foreign exchange brokers make the foreign exchange market highly efficient.Exchange rates are almost identical no matter where in the world the transaction is taking place.3.1 Fixed exchange rate regime3.2
6、 Flexible exchange rate regime3.3 Managed exchange rate regimeUnder a fixed exchange rate regime,the value of the pound would be pegged by the Bank of England.Under a flexible exchange rate regime,the value of the pound would be determined by market forces with no intervention by the Bank of England
7、.Under a managed exchange rate regime,the Bank of England would intervene in the foreign exchange market to smooth out fluctuations in the value of the pound but it would not seek to maintain the pound at an absolutely constant value for a long period of time.Also,under a managed exchange rate regim
8、e,the government would not announce the value of the pound that it wished the Bank of England to achieve.4.1 Flow theory4.2 Monetary theory4.3 Portfolio balance theoryThe flow theory of the exchange rate is the proposition that the exchange rate adjusts to make the flow supply of pounds equal to the
9、 flow demand for pounds.The flow supply of pounds in any given period depends chiefly on the value of United Kingdom importsThe flow demand for pounds in any given period depends chiefly on the value of United Kingdom exports that foreigners plan to buy during that period of time.In addition to the
10、flow demand and supply resulting from imports and exports,there is also a net flow demand or supply resulting from other international payments such as interest,profits and loans.The monetary theory of the exchange rate is the proposition that the exchange rate adjusts to make the stock of a currenc
11、y demanded equal to the stock supplied.The stock of a currency is identical to the quantity of money.The portfolio balance theory of the exchange rate is the proposition that the exchange rate adjusts to make the stock of all financial assets denominated in units of that currency demanded equal to t
12、he stock supplied.(1)In general,though,when United Kingdom citizens buy foreign products or invest in another country,they have to use some sterling to obtain some of that countrys currency to make the transaction or alternatively give sterling to the foreign firm and let it use that sterling to buy
13、 some of the currency used in its own country.(2)Under a managed exchange rate regime,the Bank of England would intervene in the foreign exchange market to smooth out fluctuations in the value of the pound but it would not seek to maintain the pound at an absolutely constant value for a long period
14、of time.(3)Thus,in considering the determination of the exchange rate,even if we approach the matter from the point of view of the flow supply of and demand for a currency,we cannot avoid considering the demand for a currency as a stock to hold rather than as a flow.(4)The portfolio balance theory o
15、f the exchange rate is the proposition that the exchange rate adjusts to make the stock of all financial assets denominated in units of that currency demanded equal to the stock supplied.(5)This total includes sterling-denominated securities issued by the government and by firms,in addition to the s
16、terling-denominated liabilities of the Bank of England and the sterling-denominated deposit liabilities of the banks and building societiesthe United Kingdom money supply.(1)What is the foreign exchange rate?(2)What will happen to the price of exports when the foreign exchange rates increase or decrease?(3)Explain the foreign exchange market regimes over the world.(4)Discuss the theories of the determination of the foreign exchange rate.
