Readers Comment from post: Should the UK join the Eurozone So now it is 2013. Britain has spent a number of years with its interest rate set at just about zero, has entered a triple recession, has lost it’s AAA credit rating and Sterling is only worth €1.15 a drop of over 30% against the …
The Bank of England is primarily responsible for managing the Money Supply and setting interest rates. In recent times the Bank has rarely tried to influence the exchange rate. Nevertheless the Bank of England are responsible for managing the UK’s foreign exchange reserves and could influence the exchange rate if policy warranted this. The Bank …
Currency convertibility means that a particular currency can be easily and readily changed into another currency. Free convertability is a factor of a hard currency. (A hard currency is expected to be stable and retain its value in long term, e.g. Dollar, Japanese Yen) Convertibility is a feature of fully flexible exchange rates. Restrictions on …
Why have countries in the Eurozone faced greater difficulties in promoting economic recovery? How does a country with its own currency find greater flexibility in overcoming a recession? 1. Impact of Currency and Bond Yields A striking feature of recent years is that countries in the Eurozone have been significantly more susceptible to rising bond …
The Chinese government have been criticised for the ‘manipulation’ of their currency. They would prefer not to use the word ‘manipulation’ perhaps they have an unofficial exchange rate target to keep Chinese currency undervalued to promote growth and exports. At the moment China only pegs its currency against the dollar and not a wider basket …
Readers Question: What would happen if a major currency, such as the dollar gets backed by gold again? If a major currency was backed by gold it means the government must hold sufficient gold to convert representative money into gold at the promised exchange rate. It means that the country would not be able to increase the money …
Readers Question: Could you explain this article China had pegged its currency to the dollar, keeping its value artificially low. To peg your currency against the dollar This means that China has been trying to keep the value of its currency against the dollar the same. For example, if 1 Chinese Yuan = 0.16 Dollars …
Readers Question: Is it possible for central banks to fail in devaluing their currency since they can print unlimited amounts of money e.g like in the Swiss bank intervention. Do their losses matter, since they can write off their losses at essentially no cost? In theory, there is no limit to the amount of money …