International Finance Management - Term Paper Example

Three weeks data ranging from seventh October to 29th of the same month, showed mixed performance by all currencies. US dollar depreciated against most currencies showing a negative performance overall. The only positive gain was against Yen which was expected as Japanese government is trying to support exports in an ailing export industry. Pound showed the best performance in comparison to dollar, despite some negative statements made by the British president. Peso for the initial period showed some positive signs due to improved performances in the stock market.

Shits in market sentiments in later half of the month couldn’t completely eat up the gains but did reduce them considerably for Mexican Peso. Euro the closest competitor of the dollar showed mixed performance amidst, spikes in dollar value and positive performances in European markets. Each nation around the world has its own currency. The strength of its respective currency is a reflection of economic strength. In many respects each country operates similar to an MNC when it comes to demand for currency.

It needs foreign currency to make international payments, maintain foreign reserves and finance imports. Thus it is necessary for each country to not only manage its own currency value but also keep an eye on international currency movements. Over the years the internal monetary system has seen many drastic changes. The system has evolved from the gold standard, fixed rate system and now to a floating rate system. In the gold standard system each currency was convertible to a fixed amount of gold.

Therefore countries accumulated gold to increase currency value. After the failure of the gold standard system for obvious reasons a new system was established known as fixed rate system. Under the fixed exchange rate system, national currencies were monitored and it was ensured that there were no sudden movements in currency rates. However