Contemporary Issues in the Foreign Exchange Market - Essay Example

The foreign exchange market is the worldwide buying and selling of currencies. This is the market responsible for determining the value of diverse currencies around the world. According to Coyle (2000), currently, there are three currencies that dominate the foreign exchange market. They are the United States of America dollar ($), the British pound (£), and the European euro. These three currencies influence the foreign exchange market a lot, and as a result, they are considered the most stable currencies in the world. This has resulted in international trade begin done mostly by one of the three currencies, (Shamah, 2011). The foreign exchange market is very sensitive as its result affects a lot of aspects of the world economy. For example, according to Ulrich (2009), it determines the cost of importing or exporting raw materials from one country to another. This in turn determines the cost of production which influences the price of the goods and services.

Research Questions

Firstly, what is the effect of the global economic crisis of 2008 on European currencies? Secondly, what is the effect of the global crisis of 2008 on the United States of America dollar? What is the effect of the 2008 economic crisis on developing and underdeveloped countries' currencies? Are there artificial reasons such as price-fixing that influence the foreign exchange market? The effects these artificial reasons have had on the foreign exchange market. Data

Required Answering Any of the Questions

I propose to test the first three questions. The three questions are generalized under the effect the 2008 economic crisis has on the foreign exchange market globally. I will sample currencies of at least three countries in Europe, the United States of America three developing countries, and one underdeveloped country. For Europe, I will consider the United Kingdom, Germany, and Greece.

It will use the formula; Y/100 (z) where y will be the percentage increase or decrease in the economy of the specific country as a result of the 2008 global economic crisis. Z will be the average currency price of the specific country in British pounds. I will then compare the results with the prices of the currencies at specific times.