The next stage is to analyze the information gathered. Here is where you incorporate the information regarding the operations, transactions, and corporate objectives with an analysis of the currencies in which the company operates. You identify the risk, in dollar amount, and report the results, along with suitable recommendations. The procedure used to determine risk […]
Here I wish to explain the meaning of this term in more detail. The swap rate is to the foreign exchange market what the interest differential is to the money market.
The swap rate is not an exchange rate; it is an exchange rate differential When the interest differential between the U.S. dollar and the pound […]
In the United States, explicit authorization for foreign-exchange intervention is technically in the hands of the Treasury. The Gold Reserve Act of 1934 created an Exchange Stabilization Fund (ESF) expressly to enable he Treasury to intervene in the market when necessary to stabilize the dollar. According to that act, the ESF is under the exclusive […]
Throughout the 1980s, Japanese banks were significantly undercapitalized. Although by the end of 1989 most of Japan’s big banks had achieved the 8 percent capital ratio required by the Bank for International Settlements, the criteria for “capitalization” were dubious. Under Japanese regulations, big banks could count 45 percent of their “hidden assets” as capital-assets […]
By the early 1990s it was apparent that Japan would insulate itself from the U.S. depression by expanding into other markets, reducing its reliance on U.S. trade, and decreasing its holding of U.S. money instruments. These tactics, combined with Japan’s refusal to make a major commitment of funds to the Gulf War, served to […]
One of the givens of a multinational power is that it cannot default on its debt. There are an almost infinite number of refinancing schemes available when one controls the currency with which the debt is repaid and the moody supply from which repayments are made. (By contrast, when a Third World nation cannot […]