MGMT 673 – Global Economic Analysis
3: Foreign Exchange
This assignment is due at the end of Module 6.
Foreign exchange rates are determined by supply and demand
in the global currency markets. The objective of this assignment is to provide
insight into the daily workings of the exchange markets and develop a deeper
appreciation for the forces that drive supply and demand. You will choose a
foreign currency and show how the theory explains recent trends in the exchange
Search for articles published within the last 60 days on
foreign exchange markets in the Wall Street Journal, the Financial Times and
The Economist. Choose a currency of interest that’s been making the financial news.
Do not select a currency with fixed exchange rates such as the Chinese yuan
that doesn’t respond to market forces. Describe the economic conditions for the
chosen country that influence exchange rates. Illustrate the recent (one year
or less) changes in exchange rates to the US dollar in text and graphically.
Then, summarize the developments and market forces reported in the articles
that are seen as driving the recent appreciation or depreciation of the
currency. Ensure your summary is a synthesis of the articles and not just a
series of excerpts from your research (Do not summarize each article
Suitable charts of exchange rates are available from many
online sources including Google Finance, Yahoo Finance, and FOREX.com among
many others. Once again, however, the
best source may be the Federal Reserve Bank of St. Louis FRED dataset. Follow this path in FRED: Categories/Money, Banking, &
Finance/Exchange Rates. Use care in
interpreting the currency being priced, for example, do you have $/€ or
€/$. Dollars per foreign currency is
best, but the ratios are reciprocals, so either will work.
Next, apply the theory of supply and demand to further
assess the recent trends employing the major factors Marthinsen discusses in
Chapter 15 under the section titled “What Causes Exchange Rates to Change?” Not
all factors will be applicable and the theory may occasionally seem in conflict
with the current market movements. Your task is to reconcile the theory with
the market. You may find this currency traders’ rule of thumb helpful in your
thinking: The local currency appreciates when funds flow into a country.
Your paper should be in APA
format including title page, running head, page numbers, appropriate headings,
citation of sources, a reference listing, and any appendices. Use an APA
Revised – 05/06/14
guide such as the Purdue Online Writing Lab. The paper should not exceed four
pages not including a title page and reference list and any appendices you may
wish to add.
The Wall Street Journal, Financial Times and The Economist
are available through the Hunt Library ProQuest database. These publications
charge for most of their content, so do not accesses the websites directly; use
ProQuest. An effective search technique is to first use the “Publications” tab to search for each of the three
publications. Select the publication and then use the “Search for Articles
Within this Publication” feature.
Limit your search to the last few months. Use “currency” and similar search terms
to locate relevant articles.
Revised – 05/06/14
IGNMENT: FOREIGN EXCHANGE MARKET