foreign exchange

1. FOREIGN
EXCHANGE

8. CAPS POLICY:
Gr11 & 12 TERM 2 WEEK 6 - 7

9. CAPS POLICY:
TERM 2 WEEK 6 - 7
SERIOUS CHALLENGE
DIFFERENTIATING
BETWEEN
BSR AND BBR

10. WORD QUIZ
Identify the following concepts:
1. Instruments such as paper
currency, notes, and cheques, used
to make payments between
countries…

11. 2. The practice of converting one
currency into another is called …

12. 3. The value of one country’s
currency in terms of or in relation
to another currency…

13. 4. Currency rates ranging from being
high to low to higher to lower …

14. 5. The process of a currency being
sold or bought is…

15. 6. The rate at which the forex dealers
will sell foreign currency / The rate
used when tourists buy foreign
currency from a institution …..

16. 7. The rate at which the forex dealers
will buy foreign currency / The rate
used when tourists sell foreign
currency to an institution …

17. TOURISM IS THE WORLD'S LARGEST
EARNER OF FOREIGN CURRENCY:
☼South Africa attracts 0.2% of the annual
estimated 300 million tourists in the world
☼Foreign tourists who stay 17 days on average
spend R850/ day
☼The tourism industry employs an estimated
3% of South Africa’s workforce
☼It is regarded as potentially the largest
provider of jobs & earner of foreign exchange

18. “…the total value of goods
produced and services provided in
a country during one year…”

19. GROSS DOMESTIC PRODUCT
IN
SUMMARY
GDP is…
TOTAL

20. GROSS DOMESTIC PRODUCT
• GDP is often considered an indicator of a
country's standard of living
• GDP INDICATES the present economic
status of a country in world
• The GDP is used to measure economic
progress in a country
– If GDP is rising, the economy is good and
the nation is moving forward
– If GDP is down, the economy is in trouble
and the nation is losing ground

21. GDP: LINKED WITH INVESTOR
CONFIDENCE IN A COUNTRY
• When media / politicians made blunt
statements it effects the view of
investors:
• Positive statements will create
investors confidence
• Negative statements will harm the
image of a country & the investors
confidence

22. BENEFITS OF
GDP
GROWTH TO
SA ECONOMY

23. 1. Income generation
• Tourists visiting South Africa and spend their
money on products and services in their
country (e.g. flights, car rental,
accommodation, restaurants, attractions and
activities)
• Tourism generates money, contributes to the
GDP
• Tourism is currently one of the largest
contributors to the GDP of South Africa

24. 1. Income generation
• Money spent by tourists in our country creates
income in SA through job creation and the
earning of salaries (alleviate poverty)
• This creates demand for other products &
services in the local economy
• An increased spending in SA – whole SA
benefits
• Leakage does not occur – money stays in SA
were tourism occurs – it does not leave the
country

25. 2. Employment / job creation
• Employment is created in
underdeveloped areas and other
areas where tourists are visiting
• Employing locals in underdeveloped
areas results in keeping locals in the
area and preventing urbanisation

26. 3. Improvement to the infrastructure
• Tourism stimulates the development of
infrastructure and improves the living
conditions of locals
• Improvements to infrastructure:
–roads, railway lines, harbours, airport
runways
–water and electricity, other power
supplies & communication networks
–sewerage disposal systems & other
utilities to serve both local residents and
the tourism influx

27. 4. Skills development
• Education & training programs
Tourism businesses and NGO’s help
to improve & manage human
resources – up skilling of people
• Communities MUST BE involved in
tourism activities and benefits in
order to:

28. THE MULTIPLIER EFFECT
• The value of expenditure that has a
positive economic effect on multiple
levels.
–Money spent in a particular area creates
jobs
–The jobs in turn creates demand for
other products & services in the local
economy

29. THE MULTIPLIER EFFECT

30. THE MULTIPLIER EFFECT
•Tourism not only creates jobs in the
tourism sector & but other sectors too.
•Known as the multiplier effect.

31. ‘Strong’ and ‘weak’ ZAR
• The RoE determines the strength of a
countries currency
• Strength of the ZAR compared to other
currencies for e.g. 1 U$ = R9.04
• In comparison: ZAR to U$, the ZAR is
weak
• Compare the ZAR with Japan, the R is
strong 1 ZAR = 10.49 ¥ (=R0.09c)

32. ‘Strong’ and ‘weak’ ZAR

33. ‘Strong’ and ‘weak’ ZAR

34. ‘Strong’ and ‘weak’ ZAR

35. ‘Strong’ and ‘weak’ ZAR
• A WEAKER ZAR doesn’t necessarily
display a negative impact
• A STRONGER ZAR leads to less
tourists travelling to SA

36. ‘Strong’ ZAR
• Less tourists arrivals = less Foreign
currency
• Tourists will have less money to spend
• Tourist will receive less Rand’s for his
currency
• Length of stay is a shorter period or
tourists will not visit at all
• Long haul destination – an expensive
option

37. ‘Strong’ ZAR
• Many tourist will consider other cheaper
destinations to get VFM
• SA is perceived as an expensive
destination
• Tourists will stay away
• This will lead to a decrease in the
contribution to the GDP
• It will have negative effect on the economy
– paying higher taxes
• Can lead to job losses

38. ‘Weak’ ZAR
• More foreign tourists arrivals to SA
• Foreign tourists get more R for their
currency
• Tourists have more money to spend
during their visit
• The length of stay will be longer
• SA will be perceived as a ‘cheap’
destination

39. ‘Weak’ ZAR
• SA will be regarded as a VFM (value
for money) destination
• This will lead to an increase in the
GDP of SA
• It will have a positive impact on the
economy – less taxes
• It can lead to job creation & more
spending – multiplier effect

40. THE RELATIVE STRENGTH OF A
CURRENCY AT A SPECIFIC TIME
• The strength is influenced by:
–Discovery of minerals
–Political stability – peaceful elections
and positive outcomes
–Time of the year like
Easter/Christmas
–Positive image and reporting
–Economic stability

41. THE RELATIVE WEAKNESS OF A
CURRENCY AT A SPECIFIC TIME
• Natural disasters
–Destroying of the infrastructure /
physical environment
–No basic services
• Economic instability
–Recession (the crunch) /
unemployment

42. TSUNAMI IN JAPAN 2012

43. INTERPRET A CURRENCY RATE SHEET
• A currency rate sheet is a list of the
rates of exchange (RoE) at which
foreign currencies are bought and
sold
• RoE: The value of one country’s
currency in terms of or in relation to
another currency
• This rate will determine how much
foreign currency you will receive,
when you exchange your money

44. INTERPRET A CURRENCY RATE SHEET
• Foreign currencies are displayed
by a three letter code the first two
letters refer to the country code
and the 3rd to the currency
• Most currencies also have a
symbol to indicate the currency

45. INTERPRET A CURRENCY RATE SHEET
• The quotation USD/ZAR 15.6000 means that
one USD is exchanged for 15.6000 ZAR. Here,
USD is the base currency and ZAR is the
counter or quote currency.

46. INTERPRET A CURRENCY RATE SHEET
CURRENCY CODE SYMBOL EXCHANGE
RATE
US Dollar USD US$ 8.94
Pound sterling GBP
₤ 14.18
Euro EUR € 12.13
Australian
dollar
AUD AU$ 9.33
Japanese Yen JPY ¥ 0.10

47. INTERPRET A CURRENCY RATE SHEET
Currency RoE
USD 15.890
GBP 18.974
AUD 7.145

48. INTERPRET A PRICE LIST / MENU
PRODUCT PRICE IN RANDS
GATSBY 15.890
SALOMIE 18.974
CHIP ROLL 7.145

49. INTERPRET A CURRENCY RATE SHEET
Currency RoE
USD 15.890
GBP 18.974
AUD 7.145

50. CONVERT MAJOR CURRENCIES
1. From ZAR to Foreign? DIVIDE ÷ RoE
R100 to $ = 100 ÷ 8.94 = 11.185 $
= 11.19 $
2. From Foreign? to ZAR MULTIPLY x RoE
150 £ to ZAR = 150 X 14.18 = R2127.00

51. DIFFERENTIATE BETWEEN
BSR AND BBR
• BANK SELLING RATE:
• This is the rate at which the forex dealers
will sell foreign currency
• The rate used when tourists buy foreign
currency from a institution
• BANK BUYING RATE:
• This is the rate at which the forex dealers
will buy foreign currency
• The rate used when tourists sell his foreign
currency to an institution

52. DIFFERENTIATE BETWEEN
BSR AND BBR
• Look at it from the Bank’s position:
–What is the Bank doing with the
foreign currency?
–Is the bank selling foreign
currency? (BSR)
–Is the bank buying foreign
currency? (BBR)

53. BBR
BSR

54. BBR OR BSR?
• A tourist from SA will be visiting Brazil and
needs to exchange his ZAR to the foreign
currency.
• BSR
• After returning to his home country a
British tourist exchanges his foreign
currency back to his own currency.
• BBR

55. Currency BBR BSR
USD 15.293 15.890
GBP 18.364 18.974
A tourist from SA will be visiting New
York and needs to exchange his R5000 to
USD.
R5000 divided by ROE
R5000 divided by 15.890