金融英语课件：Deterninants of FX Rates

Unit9:DeterminantsofFXRatesFinancialEnglishUnit8TextBankingSupervisionUnit9:RevisionofUnit8

BackgroundinformationofUnit9Unit9ExercisesAssignmentReviewofUnit8 Dictation

ExercisesCheck-up

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Reading

RevisionofTextASpotDictationDictation! Youaregoingtohear5sentences.Eachwillbereadthreetimes.Writedownthesentencesaccordingtowhatyouhear.1. 2. 3. 4. 5.Check-upKeytoDictation:1. Banksareoftendescribedasoureconomy'sengine

.2. Bankingisanindustrythatissubjectbothtomarketcompetitionandconsiderableregulation3. Supervisionrequiresthecollectionandanalysisofinformation

.4. Inreturn,whenthedepositorssufferfromgreatloss,theymayloseconfidenceinthebanks

.5. Akeyfactorofbankingsupervisionistheabilityofthesupervisorstosupervisetheconsolidatedbankingorganization

.DictationII.Fillintheblankswithproperwordsorphrasesgivenbelow

Check-upissuetermnoteholderreputationdealershipcomedueappropriatenegotiable

Bankers’acceptancesareveryoldformofcommercialcredit.Theyprovideamethodwherebyabankmayadditsgoodnameand

tothepromissorynoteofaborrower,therebymakingthe

muchmoremarketablethanitwouldotherwisebe.Specifically,themechanicsoftheoperationtypicallyworklikethis.SupposethatanAmericanexportersellswheattoaChineseimporter.The

ofthesalearethattheChineseimportwillpayforthewheatninetydaysafteritisshipped.

Check-upCheck-upAforavarietyofreasons,however,theAmericanfirmmaywantitsmoneynow,andnotwanttowaitninetydays.Ifso,itmay

adraftonitsbankorderingthebanktopayastipulatedsumofmoneyto

ofthedraftninetydaysfromnow.Alongwiththedraft,theAmericanexporterwillsend

documentsshowingthatthewheathasactuallybeen

.

ClozeWhenthebankreceivesthedraft,togetherwiththedocumentation,itstamps“accepted”acrossthefaceofit.Byacceptingthedraft,thebankhasgivenitsunconditionalguaranteetopaythedraftwhenit

.Thedraftisnowa

,marketableinstrument.ItisreturnedtotheAmericanexporter,whowillsellitthrougharegular

inbanker’sacceptance.(FromFinanceEnglishbyChenJianhui)

Check-up

Bankers’acceptancesareveryoldformofcommercialcredit.Theyprovideamethodwherebyabankmayadditsgoodnameand

tothepromissorynoteofaborrower,therebymakingthe

muchmoremarketablethanitwouldotherwisebe.Specifically,themechanicsoftheoperationtypicallyworklikethis.SupposethatanAmericanexportersellswheattoaChineseimporter.The

ofthesalearethattheChineseimportwillpayforthewheatninetydaysafteritisshipped.

Check-upreputationnotetermsCheck-upAforavarietyofreasons,however,theAmericanfirmmaywantitsmoneynow,andnotwanttowaitninetydays.Ifso,itmay

adraftonitsbankorderingthebanktopayastipulatedsumofmoneyto

ofthedraftninetydaysfromnow.Alongwiththedraft,theAmericanexporterwillsend

documentsshowingthatthewheathasactuallybeen

.

issueholderappropriateshippedClozeWhenthebankreceivesthedraft,togetherwiththedocumentation,itstamps“accepted”acrossthefaceofit.Byacceptingthedraft,thebankhasgivenitsunconditionalguaranteetopaythedraftwhenit

.Thedraftisnowa

,marketableinstrument.ItisreturnedtotheAmericanexporter,whowillsellitthrougharegular

inbanker’sacceptance.(FromFinanceEnglishbyChenJianhui)

comesduenegotiabledealerReviewofUnit8 Dictation

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Reading

RevisionofTextAIII.ReadingComprehension1.Supposethatthefractionalreserveis24percent,thus,whenacustomerdeposits1000yuaninabank,itmayimmediatelysetaside_________asareserve.A.24yuanB.120yuanC.240yuanD880yuan

2.Ifthefractionalreserveratiois12percent,andtheoriginaldepositis1000yuan,howmuchnewmoneywillbecreatedinthesystem(Unit:yuan)?A.8333.33B.73333.33C.6666.66D120ReadingComprehension3.Assumeyourbankhaslentallofitsavailablefundsbasedonareserveof12percentandthereisanewreserverequirementof25percent,itmustimmediately___________tobuilditsreservestomeetthenewreserverequirement.A.attractnewdepositsB.makenewloansC.takebankdepositsD.setasidelessmoney

ReadingComprehension4.IftheFedissuesachangerequiringthat20percentofdepositsbesetasideasareservecomparedtotheformer30percent.Thenthenewmaximummoneyincirculationwill__________.becomelessB.becomemoreC.notchangeD.be10percent

ReadingComprehension5.Loansmadeagainstthe________arekeyfactorinbankingandcurrentfractionalreservedepositmoneyexpansionactivities.A.requirementB.fractionalreserveC.theamountofdepositsD.bankingregulationsReviewofUnit8 Dictation

ExercisesCheck-up

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Reading

RevisionofTextA

Text:BackgroundInformation

外汇是国际贸易的产物，是国际贸易清偿的支付手段。外汇（Foreign

Exchange）即国外汇兑，“汇”是货币异地转移，“兑”是货币之间进行转换，从动态上讲，外汇就是把一国货币转换成另一国货币，并在国际间流通用以清算因国际经济往来而产生的债权债务。从静态上讲外汇又表现为进行国际清算的手段和工具，如外国货币，以外币

计价的各种证券。

Text:BackgroundInformation

外汇汇率是用一个国家的货币折算成另一个国家的货币的比率、比价或价格；也可以说，是以本国货币表示的外国货币的"价格"。由于国际间的贸易与非贸易往来，各国之间需要办理国际结算，所以一个国家的货币，对其他国家的货币，都规定有一个汇率，但其中最重要的是对美元等少数国家货币的汇率。

Text:BackgroundInformation基本理论1）国际平价条件a）购买力平价(PPP)b）利率平价(IRP)c)费雪效应2）国际收支模式3）资产市场模式4）美元和美国资产市场(略)

Text:BackgroundInformation

本章旨在通过介绍外汇、汇率的定义，决定汇率的三种理论、汇率的决定因素、以及金融工具让学生重温外汇有关知识。在政治、经济社会生活中，存在着许多因素会引起货币币值和外汇供求状况发生变化，进而引起汇率发生变动，在这众多因素中，我们主要从三个方面来谈：经济因素，政治因素以及市场心理预期。本章重点外汇和汇率，学生重点掌握外汇和汇率的概念及外汇的决定因素。

Text:BackgroundInformation本章重点难点通过本章学习，学生应该掌握:什么是外汇?什么是汇率?决定汇率的理论汇率的决定因素Unit9:Unit9Foreignexchangemarket

PartI:

9.1ForeignexchangeandforeignexchangeratesReadingSkillPartII:9.2TheoriesofforeignexchangeratePartIII:9.3DeterminantsofFXrates

ListeningText

TextListeningTextDeterminantsofFXRates

Listencarefullytothefirstpartofthetextandthentrytotranslateit.DeterminantsofFXRates9.1ForeignexchangeandforeignexchangeratesForeignexchangerefersto

currencyandmoneyclaims,suchasbankbalancesandbankdrafts,whichisexpressedintheequivalentvalue

inforeignmoney.Foreignexchangeisacommodity,anditspricefluctuatesinaccordancewith

supply;exchangeratesarepublisheddailyintheprincipalnewspapersoftheworld.ThetermForeignexchangeisalsousedtorefertotransactionsinvolvingtheconversionofmoneyofonecountryintothatofanotherortotheinternationaltransferofmoneyandcreditinstruments.Text:Theuseofforeignexchangearisesbecausedifferentnationshavedifferentmonetaryunits,andthecurrencyofonecountrycannotbeusedformakingpaymentsinanothercountry.Becauseoftrade,travel,andothertransactionsbetweenindividualsandbusinessenterprisesofdifferentcountries,itbecomesnecessarytoconvertmoneyintothecurrencyofothercountriesinordertopayforgoodsorservicesinthosecountries.Text:

Ordinarily,andwithoutgovernmentrestrictions,therateofexchange,orthepriceofthecurrencyofonecountryintermsof

thatofanother,willdependonoverallsupplyanddemandandontherelativepurchasingpowerofthetwocurrencies,thatis,onthecompetitivepositionofthetwocountriesinworldmarket.Changesofforeignexchangeratesarenotoriouslyhardtoforecast.Anyfactorthatchangestheexpectedreturnsondomesticorforeigndepositswillleadtochangesintheexchange.TextB:

Text:LanguagePointsreferto指的是，引用，谈及Thatremarkreferstosomeoneelse.

那句话是指另一人说的。Thisobviouslyrefers

totheNile.

这里说的显然是尼罗河。Heusuallyrefershispupilstothisdictionary.

他平常叫学生查这本字典。

Text:LanguagePointsequivalentvalue

等值,当量值,等效值,换算值

equivalent

adj.相等的,相当的,相同的

Yetthiswassmallerthantheconcurrentdeclineof4.3percentinGDPinvalueterms,duetoanetfactorincomeinflowtoTianjinequivalenttoabout1.9percentofGDPinthatyear.

不过，这个跌幅已较同期以价值计算本地生产总值的4.3%跌幅为小，因为该年天津有相当于本地生产总值约1.9%的对外要素收入流动净值。

beequivalentto

相等[当]于...,等(同)于,与...等效

Whatis￡5equivalenttoinFrenchfrancs?

5英镑相当于多少法国法郎？

inaccordancewith与...一致,依照Foreignexchangeisacommodityanditspricefluctuatesinaccordancewithsupplyanddemand.外汇是一种商品，它的价格随着供求的变化而上下浮动。Heactedin

accordance

withhisbeliefs.

他按照自己的信念行事。Text:LanguagePoints

Text:LanguagePointsinvolvevt.使卷入;包括;包含;涉及Allthesequestionsinvolvepolicyandtactics.

这些问题，都涉及政策和策略。Hewasinvolvedinworkingoutaplan.他专心致志地制订计划。Don'tinvolvemeinyourmistakes.

别把我牵连进你的错误里。

Text:LanguagePointsconvert（可）转变为；兑换为；转而使用

Atwhatratedoesthedollarconvertintopounds?美元以什么汇率兑换成英镑？JohnhasconvertedtoBuddhism.约翰改信佛教。Heconvertedassetsintocashbeforehewentabroad.他在出国前把资产转化成了现金。

Text:LanguagePointsconversionn.转变Yourcaserequiresalicenseforconversionandoutgoingremittance.您这种情况要求有换汇和会出许可。HehasundergoneareligiousconversionafterhewenttoAmerica.

他来到美国后，经历了一次宗教信仰的转变。Text:LanguagePointsintermsof根据,按照,用...的话,在...方面Paymentismadein

terms

ofcash

.款项以现金支付。Youcouldthinkofitin

terms

ofaninvestment.

你可以从投资的角度来考虑那件事。Text:LanguagePoints

notoriouslyad.臭名昭著的,声名狼藉的

Manyexistingretailershavedoneanotoriouslypoorjobofutilizingcustomerinformationtodate．

迄今，很多现有的零售商在利用顾客信息方面做得极其差。

Tosome,suchextravagantspendingonthenotoriouslyfickleyoungmightseemoutrageous.

有些人反对花很多钱给小毛孩买奢侈品，认为是种浪费。

Onethreatthatisnotoriouslydifficulttoquantifyistheillegalpettrade.

一个众所周知的难以确定的威胁来自非法宠物交易。TextB:ReadingSkillCheck-up1. Hiscreditisgoodforonly

￡50.

A)goodopinionofothers

B)reputationcomingfromtheapprovalorgoodopinionofothers C)asumofmoney

availableforaperson'suse

TextB:ReadingSkill1. Hiscreditisgoodforonly

￡50.

A)goodopinionofothers

B)reputationcomingfromtheapprovalorgoodopinionofothers C)asumofmoney

availableforaperson'suse

TextB:ReadingSkillCheck-up2. Thebankrefusedfurthercreditstothecompany.A)reputationcomingfromtheapprovalorgoodopinionofothers B)beliefinthetruth,reliability,quality,etc,ofsomeoneorsomething

C)thesumofmoneythatabankmakesavailabletoaclient

TextB:ReadingSkill2. Thebankrefusedfurthercreditstothecompany.A)reputationcomingfromtheapprovalorgoodopinionofothers B)beliefinthetruth,reliability,quality,etc,ofsomeoneorsomething

C)thesumofmoneythatabankmakesavailabletoaclient

TextB:ReadingSkillCheck-up3.Thebankreceivesdraftspayableatsightatanytime

。A)billofexchangeB)anallowanceonmerchandisesoldbyweightC)agroupoflivestockseparatedfromtherestoftheherd

TextB:ReadingSkill3.Thebankreceivesdraftspayableatsightatanytime

。A)billofexchange

B)anallowanceonmerchandisesoldbyweightC)agroupoflivestockseparatedfromtherestoftheherd

TextB:ReadingSkill

A)tobringintoorholdinequilibrium

B)beequalto

C)tohavethedebitandcredittotalsequal

A)calmnessofmind B)harmonyinthepartsofawhole C)astateofequilibrium

Check-up4.Shebalancesherselfonthebalancebeamwithasinglearm.

TextB:ReadingSkillA)tobringintoorholdinequilibrium B)beequalto

C)tohavethedebitandcredittotalsequal

A)calmnessofmind B)harmonyinthepartsofawhole

C)astateofequilibrium

4.Shebalancesherselfonthebalancebeamwithasinglearm.

TextB:ReadingSkillCheck-up5.Everycitizenmayclaimtheprotectionofthelaw.A)totake

B)tocallfororneed;

C)assertone'stitleorrightto

TextB:ReadingSkill5.Everycitizenmayclaimtheprotectionofthelaw.A)totake

B)tocallfororneed;

C)assertone'stitleorrightto

ListeningLanguagePoints

GuessingUnknownWordsandExpressionsTextListeningText9.2Theoriesofforeignexchangerate

Listencarefullytothesecondpartofthetextandthentrytotranslateit.9.2TheoriesofforeignexchangerateInafixedexchangerate

regime,FXratesaredecidedbyitsgovernment.ThefollowingtheoriesexplainthefluctuationsinFXratesinafloatingexchangerateregime.Text:INTERNATIONALPARITYCONDITIONSInternationalparityconditions,viz.:Purchasingpowerparity,Interestrateparity,DomesticFishereffect,InternationalFishereffect.Thoughtosomeextent

theabovetheoriesprovidelogicalexplanationforthefluctuationsinexchangerates,yetthesetheoriesfalterastheyarebasedon

challengeableassumptions(e.g.,freeflowofgoods,servicesandcapital)whichseldomholdtrueintherealworld.

Text:BALANCEOFPAYMENTSMODELThismodel,however,focuseslargelyon

tradablegoodsandservices,ignoringtheincreasingroleofglobalcapitalflows.Itfailedtoprovideanyexplanationforcontinuousappreciationofdollarduring1980sandmostpartof1990sinfaceofsoaringUScurrentaccountdeficit.Text:ASSETMARKETMODELItviewscurrenciesasanimportantassetclassforconstructinginvestmentportfolios.Assetspricesareinfluencedmostlybypeople’swillingnesstoholdtheexistingquantitiesofassets,whichinturndependsontheirexpectationsonthefutureworthoftheseassets.Theassetmarketmodelofexchangeratedeterminationstatesthat“theexchangeratebetweentwocurrenciesrepresentsthepricethatjustbalancestherelativesuppliesof,anddemandfor,assetsdenominatedinthosecurrencies.”

Text:NoneofthemodelsdevelopedsofarsucceedtoexplainFXrateslevelsandvolatilityinthelongertimeframes.Forshortertimeframes(lessthanafewdays)algorithmcanbedevisedtopredictprices.Largeandsmallinstitutionsandprofessionalindividualtradershavemadeconsistentprofitsfromit.Itisunderstoodfromabovemodelsthatmanymacroeconomicfactorsaffecttheexchangeratesandintheendcurrencypricesarearesultofdualforcesofdemandandsupply.

Text:Theworld'scurrencymarketscanbeviewedasahugemeltingpot:inalargeandever-changingmixofcurrentevents,supplyanddemandfactorsareconstantlyshifting,andthepriceofonecurrencyinrelationtoanothershiftsaccordingly.Noothermarketencompasses(anddistills)asmuchofwhatisgoingonintheworldatanygiventimeasforeignexchange.Text:InternationalParity

ConditionsExchangeratesareinfluencedbyinterestratesandinflationrates,andtogether,theyinfluencemarketsforexchangeratesinthefuture,knownasforwardrates.Thelinkagesamongthesevariablesarecalled

ParityConditions.ParityConditionsarekeyrelationshipsusedtopredictmovementsinexchangerates.

2005South-WesternPublishingInterestRateParityIfinterestratesinEuropewerehigherthantheywereintheUS,noonewouldinvestintheUSsolongastheythoughttheEuroanddollarwouldbestable.Theequilibriumconditionisknownasinterestrateparity.Lete0bethecurrentexchangeratepriceforaforeigncurrency.Anapproximationofthisparityconditionisgivenas:(f90–e0)/e0=[rUS-rEMU]

InterestRateParitySupposeinterestratesintheEuropeare1%for90days,andonly.5%intheUS.WewouldexpectthevalueoftheEuromustfalltomakeinvestinginbothcountriesendupwiththesamereturn.Usingtheformulaabove,theleftsideistheexpectedforwarddiscount.(f90–e0)/e0=-.005,orahalfpercentexpecteddropintheEurooverthenext90days(3months).TheFischerEffectDomesticinterestrates,

r,arethesumofarealreturn,

i,andanexpectedchangeinthepricelevel,Ex(%DCPI),whichisthe

inflationrate.r=i+Ex(%DCPI)Itisoftenpresumedthatrealreturnsbecomeequalworldwide.Inthatcase,theFisherEffectcanbeusedtoexaminedifferencesintwocountry’sinterestrates.FortheexampleoftheUSandtheEMU,wehave:[rUS-rEMU]=Ex(%DCPI)US-Ex(%DCPI)EMUThisequationisknownasthe

internationalfishereffect.InternationalFischerEffectSincedifferencesininflationratestendtoleadtodifferencesininterestrates,wecanusedifferencesininterestsratespredictchangesinexchangerates.[et–e0]/e0=[rUS-rEMU]

SupposethattheleftsideoftheaboveequationisthepercentagechangeinthevalueoftheEuromeasuredindollars.WhentheUShashigherinterestrates,theEurorisesinvalue.WheninterestratesarehigherinEurope,theEurowilldeclineinvalue.DiagramofParityConditionsExchangeRateForecasts

DifferencesinInterestRates

InternationalFischerEffectDifferencesinInflationRatesForwardRatePremiumorDiscountInterestRateParityFisherEffect

PurchasingPower ParityText:LanguagePointsfixedexchangerate固定汇率

What’stheexchangerate?

兑换率是多少？

Thenote-issuingbanksmayissuecurrencynotesonlybysurrenderingnon-interest-bearingUSdollarbackingatafixedexchangerateof7.80.

发钞银行必须按7.8的固定汇率交出无息美元保证，才可发行流通纸币。Text:LanguagePoints

fluctuationn.

波动,上下移动,徘徊;涨落;Themarketsteadiedafterlastweek’sfluctuation.

继上周的波动之后，市场稳定下来了。

Thewidepricefluctuationintheinternationalmarketreducebusinessdifficult.

国际市场上大幅度的价格波动使得生意很难做。

Text:LanguagePointstosomeextent某种程度上,(多少)有一点

Nationaleconomicgrowthacceleratedtosomeextent.

国民经济增长速度有所加快。Thecriticismistosomeextentjustified.

这一批评在一定程度上是有道理的。Text:LanguagePoints

basedonvt.

（与on,upon连用）根据；基于

Advertisementsbasedonthesefactshavebeenprintedinnewspapersandmagazinesbuthavenothelpedmuch.

根据这些情况拟定的广告词登载在报纸和杂志上,但是效果不大。

Thisnewsreportisbasedentirelyonfact.

这篇新闻报导是完全根据实际情况写成的。Text:LanguagePointsholdtrue适用,有效

Ibelievethoseprincipleshold

trueforeveryone,everywhere.

我相信，这些道理在任何地方、对任何人都是至理名言。

Theprincipleofequalitycitedinthisbookdoesnothold

trueinthatpartoftheworld.

他书中的平等原则在世界那一地区并不适用。Text:LanguagePoints

focuson集中与…I'dliketofocusontwopoints.

我这里主要讲两点。Youshouldfocusyourattentiononyourwork.

你应把注意力集中在你的工作上。Text:LanguagePointscapitalflows资本流动

Short-termcapitalflowsincludethenormaleverydayreceiptsandpaymentsarisingoutofinternationaltradeandfinance.

短期资本流动包括在国际贸易和国际金融中发生的日常收入和支出。

TheabsenceofanyrestrictionsoncapitalflowsintoandoutofChinaisanotherimportantfactor.

此外，资金可以自由流入和流出中国，也是一项重要的因素。

capitalflow资本流动

tradeflow贸易流量

orderflow订单量Text:LanguagePoints

appreciationn.涨价,增值

Thegrowingdemandforthecurrencyofthiscountrywillcauseitsexternalvaluetoappreciate.对一国货币不断增加的需求将造成该货币对外升值。depreciatevi.

使跌价,贬值Ifthedomesticinflationisexpectedtoincrease,thedomesticcurrencywilldepreciate.如果预期本国通胀上升，那么本币将贬值。Text:LanguagePoints

currentaccountdeficit经常帐赤字

deficitn.赤字

Oneofthemainfunctionsofbanksistotakeindepositfromsurplusregions.

银行的主要功能之一是从资金剩余地区吸收存款然后贷给资金缺乏地区。

Somecountriesarerunningstaggeringbudgetdeficitsintheworldnow.

目前，世界上一些国家正面临预算赤字。Text:LanguagePoints

viewas

将…看作beviewedas被看作是Heviewedlawyersastherealenemy.

他认为律师是真正的敌人。

Allthesearenowviewed

asnecessaries.

这些现在都看作是必需品了。Text:LanguagePoints

portfoliosn.组合

Asthefundmanagerpoolsthefundsfrommanyinvestors,hecaninvestinadiversifiedportfoliothatofferslowerrisk.

负责管理基金的专业经理会集合许多投资者的资金，组成一个风险分散的投资组合。

Aportforliomanagercanhedgeagainstanincreaseinthepurchasepriceofbondsusinginterestratefutures.

有价证券管理者可以用利率期货来防范因债券买价升高而带来的损失。

volatilityn.不稳定性,暂时性

Therefore,investorsshouldbemindfulofthevolatilityofthestockmarket.

因此，投资者应小心股票市场波动。

Interestratesandfinancialmarketvolatilitywouldremainhighduetothemarketuncertainty.

市场前景不明朗，亦会令利率持续高企，金融市场持续波动。

Text:LanguagePointsText:LanguagePoints

ever-changing变幻无穷

Shefeastedhereyesontheever-changingsceneryofrarebeauty.

她尽情观赏那变幻无穷的、难得一见的美景。

Videoconferencingiswellpositionedtohelpcompanieswhohaveaheavyrelianceonimmediateemployeecommunicationstomeetthisneedintheever

changingworkingenvironment.

在不断变化的工作环境中，电视会议被完全定位成帮助那些与雇员即时通信依赖性很高的公司，以满足其通信需求。

ListeningText

TextListeningText9.3DeterminantsofFXrates Listencarefullytothethirdpartofthetextandthentrytotranslateit.9.3DeterminantsofFXratesSupplyanddemandforanygivencurrency,andthusitsvalue,arenotinfluencedbyanysingleelement,butratherbyseveral.Theseelementsgenerallyfallinto

threecategories:economicfactors,politicalconditionsandmarketpsychology.

Text:ECONOMICFACTORSThesefactorsinclude:economicpolicyandeconomicconditions.Economicpolicyisdisseminatedbygovernmentagenciesandcentralbanks,whichcomprisesgovernmentfiscalpolicy(budget/spendingpractices)andmonetarypolicy(themeansbywhichagovernment'scentralbankinfluencesthesupplyand"cost"ofmoney,whichisreflectedbythelevelofinterestrates).

Text:Economicconditionsaregenerallyrevealedthrougheconomicreports,andothereconomicindicators,whichincludegovernmentbudgetdeficitsorsurpluses,balanceoftradelevelsandtrends,inflationlevelsandtrends,economicgrowthandhealth,aswellasproductivityofaneconomy.

Text:Governmentbudgetdeficitsorsurpluses:Themarketusuallyreactsnegativelytowideninggovernmentbudgetdeficits,andpositivelytonarrowingbudgetdeficits.Theimpactisreflectedinthevalueofacountry'scurrency,.Text:Balanceoftradelevelsandtrends:Thetradeflowbetweencountriesillustratesthedemandforgoodsandservices,whichinturnindicatesdemandforacountry'scurrencytoconducttrade.Surplusesanddeficitsintradeofgoodsandservicesreflectthecompetitivenessofanation'seconomy.Forexample,tradedeficitsmayhaveanegativeimpactonanation'scurrency.Text:Inflationlevelsandtrends:Typicallyacurrencywilllosevalueifthereisahighlevelofinflationinthecountryorifinflationlevelsareperceivedtoberising.Thisisbecauseinflationerodespurchasingpower,thusdemand,forthatparticularcurrency.However,acurrencymaysometimesstrengthenwheninflationrisesbecauseofexpectationsthatthecentralbankwillraiseshort-terminterestratestocombatrisinginflation.

Text:Economicgrowthandhealth:Reportssuchasgrossdomesticproduct(GDP),employmentlevels,retailsales,capacityutilizationandothers,detailthelevelsofacountry'seconomicgrowthandhealth.Generally,themorehealthyandrobustacountry'seconomy,thebetteritscurrencywillperform,andthemoredemandforittherewillbe.Text:Productivityofaneconomy:

Increasingproductivityinaneconomyshouldpositivelyinfluencethevalueofitscurrency.Itsaffectsaremoreprominentiftheincreaseisinthetradedsector.Text:POLITICALCONDITIONSInternal,regional,andinternationalpoliticalconditionsandeventscanhaveaprofoundeffectoncurrencymarkets.ExpectationsofwarbetweenIndiaandPakistancannegativelyinfluencethevalueofcurrenciesoftwonations.Text:Allexchangeratesaresusceptibletopoliticalinstabilityandanticipationsaboutthenewrulingparty.Politicalupheavalandinstabilitycanhaveanegativeimpactonanation'seconomy.Forexample,destabilizationofcoalitiongovernmentsinIndia,PakistanandThailandcannegativelyaffectthevalueoftheircurrencies.

Text:Similarly,inacountryexperiencingfinancialdifficulties,theriseofapoliticalfaction

thatisperceivedtobefiscallyresponsiblecanhavetheoppositeeffect.Also,eventsinonecountryinaregionmayspurpositiveornegativeinterestinaneighboringcountryand,intheprocess,affectitscurrency.Text:MARKETPSYCHOLOGYMarketpsychologyandtraderperceptionsinfluencetheforeignexchangemarketinavarietyofways:Text:Flightstoquality:Unsettlinginternationaleventscanleadtoa"flighttoquality,"withinvestorsseekinga"safehaven".Therewillbeagreaterdemand,thusahigherprice,forcurrenciesperceivedasstrongerovertheirrelativelyweakercounterparts.TheSwissfranchasbeenatraditionalsafehavenduringtimesofpoliticaloreconomicuncertainty.

Text:Long-termtrends:Currencymarketsoftenmoveinvisiblelong-termtrends.Althoughcurrenciesdonothaveanannualgrowingseasonlikephysicalcommodities,businesscyclesdomakethemselvesfel