Information about exchange Rate

2. MBA Session 2015-2019 (Sec-A)
University of Education, Lower Mall Campus, Lahore

3. Team Members:
M. ILyas Ishaq 45
M. Salman 28
M. Basit 39
Ubaid ur Rehman 15
Adnan Sharif 17

4.  Exchange Rate
 Factors That Influence Exchange Rate
 Types of Exchange Rat
 Need of Exchange Rate
 Impacts of Exchange Rate
 Impacts on Exchange Rate
 Advantages of Fixed E.R
 Disadvantages Fixed of E.R
 Advantages of Floating E.R
 Disadvantages of Floating E.R
 Conclusion

5. The price of any nation’s currency in terms of another currency.

6.  The exchange rate is important, because the suppliers in Pakistan
will require to payment in $. To pay these supplies the business
need to convert or exchange (Rs. In $). The amount of Rs. For each
$ depends on Exchange rate.

12.  No need for international management of exchange rates
 No need for frequent central bank intervention
 No need for elaborate capital flow restrictions
 Greater insulation from other countries’ economic problems
 Higher volatility
 Use of scarce resources to predict exchange rates
 Tendency to worsen existing problems

14. •The level of imports and exports depends on exchange rates as well as on income
and other factors.
•When events cause exchange rates to adjust, the levels of imports and exports will
change.
• Changes in exports and imports can in turn affect the level of real GDP and the price
level.
• Further, exchange rates themselves also adjust to changes in the economy.

16. Due to currency:
 Depreciation
 Appreciation
 Devaluation
 Revaluation

17. Depreciation:
“Currency depreciation is a decrease in the level of a currency in a floating
exchange rate system due to market forces”.
Cause of depreciation:
 Economic Fundamentals
 Interest rate differentials
 Political instability
 Risk aversion among investors
How to Breakdown:
Expected interest rate differentials can trigger a bout of currency depreciation.

18. Appreciation:
“Appreciation is an increase in the value of one currency in terms of another”
How to Breakdown:
Currency traders have to take into account appreciation when making a trade,
since a long-term currency option contract might see its value decline if the
value of the underlying currency adjusts. Additionally, as a currency
appreciates it becomes more expensive to buy that country's exports. This can
cause a contraction in the economy, which can further impact the value of the
currency.

19. Devaluation:
“Devaluating a currency is decided by the government issuing the currency, and unlike
depreciation, is not the result of non-governmental activities”
Impacts of Devaluation:
 One reason a country may devaluate its currency is to combat trade imbalances.
 Devaluation causes a country's exports to become less expensive, making them
more competitive on the global market.
This in turn means that imports are more expensive, making domestic
consumers less likely to purchase them.

20. Revaluation:
In a fixed exchange rate regime, only a decision by a country's government (i.e.
central bank) can alter the official value of the currency. Contrast to
"devaluation".
Impact of Revaluation:
For example, suppose a government has set 10 units of its currency equal to one
U.S. dollar. To revalue, the government might change the rate to five units per
dollar. This would result in that currency is being twice as expensive to people
buying that currency with U.S. dollars as previously and the U.S. dollar costing
half as much to those buying it with foreign currency.

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19931994199519961997199819992000200120022003200420052006200720082009201020112012
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Avg Exchange Rate of Last 20 Years
Exchange Rate

27. “In simple words, having a floating rate system gives you more flexibility to
respond to needs of the economy. In a recession, when unemployment is high
and growth in economy is slow, central bank can increase money supply, lower
interest rates and allow currency to depreciate in order to revive growth. In
case of a pegged currency, however, the central bank loses that kind of
freedom. A rigid system would have its advantages like anchoring inflation
expectations and lowered volatility in forex markets. The flexibility offered by
floating rate is more valuable in my opinion”.