Exchange rates. Definition The price of a currency. 1 euro = 4 zloties means that 1 zloty = 0,25 euro.

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Presentation transcript:

Exchange rates

Definition The price of a currency. 1 euro = 4 zloties means that 1 zloty = 0,25 euro

International currency market System of rules, policy tools and institutions that ensure free transfer of money among separate currency areas Domestic market Domestic market Domestic market Domestic market Domestic market Domestic market

Why currency? Co-existence of different national currencies Malaysia China RSA Finland Slovenia ringgit yuan rand euro won rupee kuna forint leu South Korea India, Sri Lanka Croatia Hungary Romania

Currency symbols DKK YPN PLN GBP USD Danish krone Japanese yen Polish zloty British pound US dollar

Demand and Supply price quantity DEMAND importers, tourists, banks SUPPLY exporters, tourists, banks ER

Lower supply of euro in Poland PLN/EUR ilość waluty Demand Supply Lower demand for Polish goods in Euro zone 3,75 4,00 Appreciation of EUR Appreciation of EUR = Depreciation of PLN

Lower demand for euro in Poland PLN/EUR quantity Demand Supply Lower demand for European goods in Poland 3,75 3,60 Depreciation of euro Depreciation of EUR = Appreciation of PLN

How will PLN/USD be affected by: Poland introducing visas for the Americans? Polish central bank ‘s intervention on the currency market (purchase of USD)? Introducing a ban on export of US beef to Poland? No visas required for Polish citizens to go to US? Reducing tariffs on American goods imported to Poland?