Want to be notified when a new article is posted? Entere your email here.

Thursday, July 21, 2005

A Brief History of Exchange Rates (via the Wall Street Journal)

China used to peg its currency to the U.S. dollar. It just announced that it will now let it float in a tight band against a basket of foreign currencies.

If you're not a finance person, you probably don't have much of an idea what I just wrote. The exchange rate is the rate at which on currency (like dollars) can be exchanged for another (like yen, or pounds). Here are a few articles that should give you enough background so that you'll get a sense as to why people make a big deal out of this.
A primer from investopedia that explains the basics of exchange rates: how they work, and why some exchange rates fluctuate and some don't

An article from the Wall Street Journal (subscription required) that goes through a brief history of exchange rates.
After the announcement of the change, the exchange rate on the yuan (China's currency) changed from 8.28 to the dollar to 8.11 to the dollar. Prior to the change in policy, the yuan/dollar exchange rate had been set by the Chinese government. Henceforth, it will be based more on market forces.

In simple terms, this means that (at least for the short term) a dollar will now buy less Chinese goods, or a yuan will now buy more American goods.


Anonymous said...

Howdy! I know this is somewhat off topic but I was wondering if you knew where I could get a captcha plugin for my comment form?
I'm using the same blog platform as yours and I'm having problems finding one?
Thanks a lot!

Feel free to visit my web site: G-Lock EasyMail - G-Lock Software

Anonymous said...

I consider something truly interesting about your site so I
saved to favorites .

My webpage :: hack a twitter account

Anonymous said...

My brother suggested I may like this blog. He was entirely right.
This post truly made my day. You can not consider simply how a lot time I had spent for this information!

My website-> criminal case facebook game cheats