The US dollar is the currency of the United States of America and is abbreviated as $, USD or US$. It is also known as the “greenback.” The US currency is an important international reserve currency, along with the Euro. Its accumulation exceeds twice that of the Euro, comprising over 60% of the world’s foreign exchange reserves.
The US coins in circulation are:
1¢ (one cent) – also referred to as a penny
5¢ - nickel
10¢ - dime
25¢ - quarter
50¢ - half dollar or fifty-cent piece
$1 - dollar or dollar coin
Friday, October 23, 2009
Euro, Euros, Currency Euro, EU Currency, Euro Exchange Rate
Euro, Euros, Currency Euro, EU Currency, Euro Exchange Rate
The Euro is the official currency of 16 of the 27 member states of the European Union (EU). These 16 states include some of the most technologically advanced countries of the European continent and are collectively known as the Eurozone. The Euro is an important international reservecurrency. Euros have surpassed the US dollar with the highest combined value of cash in circulation in the world.
Benefits of the Euro
The most important implications of having a common currency, the Euro, are:
# Exchange rate certainty while traveling across Europe
# No exchange risk and, therefore, no cost of hedging against it
# No transaction costs
# Increased transparency and fewer transactions for importers and exporters
# Increased liquidity in the ‘United Euro’ financial market
Euro: Fact File
The Euro is an abbreviation for “European Operational Research Societies.” The association is a non-profit organization established in Brussels, Belgium. The Euro is administered by the European Central Bank (ECB) based in Frankfurt, and the Eurosystem, comprising of the various central banks of the Eurozone nations. The Euro was recognized in the Maastricht Treaty in 1992. Thecurrency was introduced initially in non-physical forms, such as travelers' checks and electronic banking, in 1999. The currency was officially introduced in the form of notes and coins on January 1, 2002.
Euro Exchange Rate: US Dollar vs. Euro
After the Euro was introduced as a cash currency in 2002, the US dollar began to steadily depreciate in value. This was due to a persistent increase in the US trade and budget deficit. By December 2004, the US dollar started falling against all major currencies and the Euro rose above $1.36/€ for the first time. An interest rate reduction by the US Federal Reserve on September 18, 2007 caused the US dollar to decline to new record lows of below $1.43 by October. In 2008, the Euro strengthened further to around $1.60. At the end of March 2009, the Euro stood at $1.3308.
Effect of the Euro on Other Currencies
A number of currencies are pegged to the Euro. Those are the B&H konvertibilna marka, Lithuanian litas, Bulgarian lev, Moroccan dirham, Cape Verdean escudo, Pacific franc, Danish krone, Slovak koruna, Estonian kroon, Central African CFA franc, Hungarian forint, West African CFA and the Comorian franc. This implies that the value of these currencies would depend significantly on the performance of the Euro. If the Euro exchange rate goes up, the value of these currencies would appreciate as well and if the Euro falls, the values of these currencies are sure to come down as well. Hence, the Euro exchange rate occupies a critical position in the context of world finance.
The Euro is the official currency of 16 of the 27 member states of the European Union (EU). These 16 states include some of the most technologically advanced countries of the European continent and are collectively known as the Eurozone. The Euro is an important international reservecurrency. Euros have surpassed the US dollar with the highest combined value of cash in circulation in the world.
Benefits of the Euro
The most important implications of having a common currency, the Euro, are:
# Exchange rate certainty while traveling across Europe
# No exchange risk and, therefore, no cost of hedging against it
# No transaction costs
# Increased transparency and fewer transactions for importers and exporters
# Increased liquidity in the ‘United Euro’ financial market
Euro: Fact File
The Euro is an abbreviation for “European Operational Research Societies.” The association is a non-profit organization established in Brussels, Belgium. The Euro is administered by the European Central Bank (ECB) based in Frankfurt, and the Eurosystem, comprising of the various central banks of the Eurozone nations. The Euro was recognized in the Maastricht Treaty in 1992. Thecurrency was introduced initially in non-physical forms, such as travelers' checks and electronic banking, in 1999. The currency was officially introduced in the form of notes and coins on January 1, 2002.
Euro Exchange Rate: US Dollar vs. Euro
After the Euro was introduced as a cash currency in 2002, the US dollar began to steadily depreciate in value. This was due to a persistent increase in the US trade and budget deficit. By December 2004, the US dollar started falling against all major currencies and the Euro rose above $1.36/€ for the first time. An interest rate reduction by the US Federal Reserve on September 18, 2007 caused the US dollar to decline to new record lows of below $1.43 by October. In 2008, the Euro strengthened further to around $1.60. At the end of March 2009, the Euro stood at $1.3308.
Effect of the Euro on Other Currencies
A number of currencies are pegged to the Euro. Those are the B&H konvertibilna marka, Lithuanian litas, Bulgarian lev, Moroccan dirham, Cape Verdean escudo, Pacific franc, Danish krone, Slovak koruna, Estonian kroon, Central African CFA franc, Hungarian forint, West African CFA and the Comorian franc. This implies that the value of these currencies would depend significantly on the performance of the Euro. If the Euro exchange rate goes up, the value of these currencies would appreciate as well and if the Euro falls, the values of these currencies are sure to come down as well. Hence, the Euro exchange rate occupies a critical position in the context of world finance.
Exchange Rate Forecast, Exchange Rate Forecasts
Exchange rate forecasts are drawn up through the computation of a currency’s value vis-à-vis other currencies over a period of time. While there are various theories that can be used to predict exchange rates, all of them have limitations. No model has been able to establish a monopoly in the forecasting process.
Exchange Rate Forecast: Approaches Employed
The two most commonly used methods for forecasting exchange rates are:
* Fundamental Approach: It forecasts exchange rates after considering the factors that give rise to long term cycles. Elementary data related to a country, such as GDP, inflation rates, productivity indices, balance of trade and unemployment rate, are taken into account. This approach is based on the premise that the ‘true worth’ of a currency will eventually be realized. Hence, this approach is suitable for long term investments.
* Technical Approach: This approach is based on the premise that it is investor sentiment that determines changes in the exchange rate and makes predictions by charting out patterns. Other tools used in this approach are positioning surveys, moving-average trend-following trading rules and FX dealer customer-flow data. Fund managers use these patterns to take informed decisions for short term investments.
Exchange Rate Forecast: Models
Some important exchange rate forecast models are:
* Purchasing Power Parity (PPP) Model: This method involves studying exchange rate movements based on the price level changes in each country.
* Uncovered Interest Rate Parity (UIP) Model: This model forecasts exchange rate movements in accordance with returns from investment in the two curencies. The UIP creates an arbitrage mechanism that sets an exchange rate which equalizes returns from domestic and foreign assets.
* Random Walk Model: This approach assumes that all available information on exchange rate movements in the future is reflected in the current exchange rate. Also, any future event leading to a change inexchange rates is purely random from today’s perspective. Thus, the best possible forecast of a currency’s value is its value today. This is the simplest approach for exchange rate forecasting.
A 1983 study by Meese and Rogoff depicted the superiority of the Random-Walk Model. However, exchange rate forecast models such as the PPP and UIP have also given successful predictions over longer timeframes. Exchange rate forecasts works best if there is a combined effort using these models.
Exchange Rate Forecast: Approaches Employed
The two most commonly used methods for forecasting exchange rates are:
* Fundamental Approach: It forecasts exchange rates after considering the factors that give rise to long term cycles. Elementary data related to a country, such as GDP, inflation rates, productivity indices, balance of trade and unemployment rate, are taken into account. This approach is based on the premise that the ‘true worth’ of a currency will eventually be realized. Hence, this approach is suitable for long term investments.
* Technical Approach: This approach is based on the premise that it is investor sentiment that determines changes in the exchange rate and makes predictions by charting out patterns. Other tools used in this approach are positioning surveys, moving-average trend-following trading rules and FX dealer customer-flow data. Fund managers use these patterns to take informed decisions for short term investments.
Exchange Rate Forecast: Models
Some important exchange rate forecast models are:
* Purchasing Power Parity (PPP) Model: This method involves studying exchange rate movements based on the price level changes in each country.
* Uncovered Interest Rate Parity (UIP) Model: This model forecasts exchange rate movements in accordance with returns from investment in the two curencies. The UIP creates an arbitrage mechanism that sets an exchange rate which equalizes returns from domestic and foreign assets.
* Random Walk Model: This approach assumes that all available information on exchange rate movements in the future is reflected in the current exchange rate. Also, any future event leading to a change inexchange rates is purely random from today’s perspective. Thus, the best possible forecast of a currency’s value is its value today. This is the simplest approach for exchange rate forecasting.
A 1983 study by Meese and Rogoff depicted the superiority of the Random-Walk Model. However, exchange rate forecast models such as the PPP and UIP have also given successful predictions over longer timeframes. Exchange rate forecasts works best if there is a combined effort using these models.
Currency Options, Forex Options, Fx Options, Currency Options Trading
Currency options are derivatives contracts in which foreign currency is the underlying asset. Currency options are also known as forex options or Fx options. The contract is between a buyer and a seller and gives the buyer the right (but not the obligation) to buy or sell the underlyingforeign currency at a specified price on an agreed upon date in the future.
Currency options are of two types: call options and put options. The buyer of a call option has the right to buy the underlying currency at an agreed upon price at a future date. A put option provides the buyer the right to sell the underlying currency.
How are Currency Options Traded?
While currency options give the buyer the right to buy or sell the underlying currency, there is no obligation to do so. However, the seller of the currency options is obligated to buy or sell the underlying currency in case the buyer decides to exercise the option.
For exercising the right to trade the underlying asset, the seller of the option is paid a price, known as premium. The price that is specified for either buying or selling at the future date is known as the strike price.
When an investor believes that the US dollar will appreciate against the Euro, he purchases a currency call option on USD/EUR. If the value of the US dollar actually increases against the Euro, the buyer can exercise his right to earn a profit.
Benefits of Currency Options
The benefits of currency options are:
* Currency options are extremely useful for hedging against the adverse movements of exchange rates.
* Currency options are the only option contracts that are traded 24 hours a day.
Risks of Currency Options
The risks associated with currency options are:
* Currency options change in value very frequently, since they are tied to the volatile forex market.
* The small outlay that is paid as the initial margin may prevent an investor from estimating the actual losses that he may suffer due to adverse market conditions
Currency options are of two types: call options and put options. The buyer of a call option has the right to buy the underlying currency at an agreed upon price at a future date. A put option provides the buyer the right to sell the underlying currency.
How are Currency Options Traded?
While currency options give the buyer the right to buy or sell the underlying currency, there is no obligation to do so. However, the seller of the currency options is obligated to buy or sell the underlying currency in case the buyer decides to exercise the option.
For exercising the right to trade the underlying asset, the seller of the option is paid a price, known as premium. The price that is specified for either buying or selling at the future date is known as the strike price.
When an investor believes that the US dollar will appreciate against the Euro, he purchases a currency call option on USD/EUR. If the value of the US dollar actually increases against the Euro, the buyer can exercise his right to earn a profit.
Benefits of Currency Options
The benefits of currency options are:
* Currency options are extremely useful for hedging against the adverse movements of exchange rates.
* Currency options are the only option contracts that are traded 24 hours a day.
Risks of Currency Options
The risks associated with currency options are:
* Currency options change in value very frequently, since they are tied to the volatile forex market.
* The small outlay that is paid as the initial margin may prevent an investor from estimating the actual losses that he may suffer due to adverse market conditions
Forex Signals, Forex Trading Signal
Forex signals are buy and sell indicators that alert investors of profit-making opportunities. These signals also enable a trader to determine the best time to enter or exit a trade. These signals are generated after a thorough technical analysis and review of charting tools and news-based events. An investor can acquire these forex trading signals for free or for a fee from professionals. This service is also offered by brokerage firms as part of their forex trading software.
Working of Forex Signals
Forex signals are produced by the constant monitoring of multiple factors, of which the economic indicators are most important, as well as analysis, including technical analysis, moving averages and market trend analysis. Traders who subscribe to these signals receive them through emails, pagers, cell phones or even as 'pop-up' messages. These forex signals are indicators to traders of attractive entry and exit points for a currency pair. A trader then needs to sign into his/her account and place the appropriate orders to book profits.
Meanwhile, an experienced trader can also automate his/her trading system to look for specific signals, interpret them and take appropriate action. With the help of automated trading signals, one can eliminate the psychological element that is sometimes known to result in losses.
Benefits of Forex Signals
The benefits of forex signals are:
1. There is no need for traders to learn trading systems or methods.
2. Traders can stop worrying about learning a complicated system that might not work well for them.
3. Effectively remove the guesswork from your financial investments.
4. Enable traders to start earning from day one.
5. Remove the psychological element, which can adversely affect trading.
6. Enable traders who do not have sufficient time to study the intricacies of the forex market to participate in the market.
7. Allow traders to utilize even those profit-making opportunities that come up when they are not actively studying the market.
Drawbacks of Forex Signals
Forex signals do not guarantee profits, since gains are dependent on the way a trader handles his/her resources. Forex signals cannot act as a substitute for knowledge of forex market fundamentals for earning long-term profits.
Working of Forex Signals
Forex signals are produced by the constant monitoring of multiple factors, of which the economic indicators are most important, as well as analysis, including technical analysis, moving averages and market trend analysis. Traders who subscribe to these signals receive them through emails, pagers, cell phones or even as 'pop-up' messages. These forex signals are indicators to traders of attractive entry and exit points for a currency pair. A trader then needs to sign into his/her account and place the appropriate orders to book profits.
Meanwhile, an experienced trader can also automate his/her trading system to look for specific signals, interpret them and take appropriate action. With the help of automated trading signals, one can eliminate the psychological element that is sometimes known to result in losses.
Benefits of Forex Signals
The benefits of forex signals are:
1. There is no need for traders to learn trading systems or methods.
2. Traders can stop worrying about learning a complicated system that might not work well for them.
3. Effectively remove the guesswork from your financial investments.
4. Enable traders to start earning from day one.
5. Remove the psychological element, which can adversely affect trading.
6. Enable traders who do not have sufficient time to study the intricacies of the forex market to participate in the market.
7. Allow traders to utilize even those profit-making opportunities that come up when they are not actively studying the market.
Drawbacks of Forex Signals
Forex signals do not guarantee profits, since gains are dependent on the way a trader handles his/her resources. Forex signals cannot act as a substitute for knowledge of forex market fundamentals for earning long-term profits.
Forex System, Forex Trading System
A forex system, or forex trading system, is a strategy or method devised by an experienced forex trader/broker to generate maximum profits. These systems help investors identify trading opportunities in the forex market, resulting in huge profits. Novice investors can buy these forex systems from brokers and use them till they gain ample expertise to formulate their own strategies.
How a Forex Trading System Works
A forex trading system uses a mix of mechanical methods and computations to calculate the right entry and exit values. While numerous forex trading systems are available in the market, none can be touted as perfect for allinvestors. In fact, selecting more than one forex trading system can help you identify entry and exit points more effectively.
Some of the popular forex systems accessible to investors are:
1. Simple Moving Average (SMA). This system helps one gauge simple averages of the exchange price of every currency from data charts. If, at any given time, the price of a currency is above the SMA, it indicates a time to buy the currency. The opposite is true in case the price dips below the SMA.
2. Support and Resistance. These levels reflect the exchange rates a currency pair tends to reach repeatedly, but fails to cross. You can recognize these levels by studying past data of a currency pair.
3. Leverage. Leverage enables traders to invest a much higher amount than they possess. However, it also exposes them to substantial risks.
4. Stop Loss Order. This forex strategy helps you generate a pre-specified price level beyond which you should neither keep your position open nor place a new buy order. This system helps you reduce your trading losses.
Benefits of a Forex System
A forex trading system helps investors:
1. Trade with greater confidence
2. Identify entry and exit points much earlier than other investors
3. Implement strategies without subscribing to expensive services
4. Learn the intricacies of forex trading faster
Drawbacks of a Forex System
Forex systems:
1. Do not work well for trades at the time of an important news release.
2. May not necessarily continue to perform well in future.
How a Forex Trading System Works
A forex trading system uses a mix of mechanical methods and computations to calculate the right entry and exit values. While numerous forex trading systems are available in the market, none can be touted as perfect for allinvestors. In fact, selecting more than one forex trading system can help you identify entry and exit points more effectively.
Some of the popular forex systems accessible to investors are:
1. Simple Moving Average (SMA). This system helps one gauge simple averages of the exchange price of every currency from data charts. If, at any given time, the price of a currency is above the SMA, it indicates a time to buy the currency. The opposite is true in case the price dips below the SMA.
2. Support and Resistance. These levels reflect the exchange rates a currency pair tends to reach repeatedly, but fails to cross. You can recognize these levels by studying past data of a currency pair.
3. Leverage. Leverage enables traders to invest a much higher amount than they possess. However, it also exposes them to substantial risks.
4. Stop Loss Order. This forex strategy helps you generate a pre-specified price level beyond which you should neither keep your position open nor place a new buy order. This system helps you reduce your trading losses.
Benefits of a Forex System
A forex trading system helps investors:
1. Trade with greater confidence
2. Identify entry and exit points much earlier than other investors
3. Implement strategies without subscribing to expensive services
4. Learn the intricacies of forex trading faster
Drawbacks of a Forex System
Forex systems:
1. Do not work well for trades at the time of an important news release.
2. May not necessarily continue to perform well in future.
Currency Converter
Overview of Currency Converters
A currency converter is a tool to calculate the value of one currency in another currency.
This content is part of the extensive resources on Insurance featured in
A currency converter is a tool to calculate the value of one currency in another currency.
This content is part of the extensive resources on Insurance featured in
Subscribe to:
Posts (Atom)