CURRENCIES What’s in your wallet? How many currencies are in use around the world? 178

Has anyone traveled out of the country? You may have had to convert dollars into a foreign currency and/or convert the foreign currency back into dollars. Does anybody know how to convert currency? – Currency conversion is similar to translating a foreign language, but in the case of currencies we use math. Does anybody know any other reasons why currency is important to financial planning? – The value of a countries currency can seriously affect the level of economic activity in the country.

1 US Dollar = Euros Which currency is stronger? – Euro How many dollars does it take to purchase 1 euro? – If we know that 1 US Dollar = Euros we can calculate the inverse by dividing 1 US Dollar by the equivalent Euros / 1 = $1.281 – This means that it takes $1.281 US Dollars to purchase 1 Euro How much would $20 be in Euros? – $20 (.7806) = Euros How much would 20 Euros be in Dollars? – 20 Euros (1.281) = $25.62 Dollars

Your turn!!! 1.00 ARS = USD Which currency is stronger? – U.S. Dollar How many Argentinean Pesos does it take to purchase 1 US Dollar? – If we know that 1 Argentinean Peso = US Dollars we can calculate the inverse by dividing 1 Argentinean Peso by the equivalent US Dollars / 1 = Argentinean Pesos – This means that it takes Argentinean Pesos to purchase 1 US Dollar How much would $20 be in ARS Pesos? – $20 (3.951) = ARS Pesos How much would 20 ARS Pesos be in Dollars? – 20 ARS Pesos(.2531) = $5.06 US Dollars

PROS for a WEAK US Dollar It is cheaper for other countries to purchase U.S. goods. More demand for U.S. goods = increased demand = more people needed to meet demand = more people employed!!! Export more than you import, the trade deficit decreases. Farmers benefit from comparatively cheaper products. Weak dollar attracts foreign investment = stronger real estate and business investment. CONS AGAINST a WEAK US DOLLAR Expensive for U.S. businesses to import goods. Price increase gets passed to consumer = HIGHER PRICES More expensive to travel and study abroad. Less foreign investment in U.S. Treasury’s.

PROS for a STRONG US Dollar Cheaper to import goods into the US. Dollar buys more abroad Cheaper for the U.S. citizen to travel abroad CONS AGAINST a STRONG US DOLLAR Foreign businesses are less likely to import from the U.S.. Our goods are more expensive relative to other countries. U.S. companies sales drop because of reduced exports U.S. Farmers are hurt because goods are cheaper in other countries. U.S. Trade deficit increases because we are importing more than exporting

Understanding U.S. Currency

Reflection Questions What is U.S. currency? – All cash and liabilities owed to other countries Who owns the most currency? – The individual citizens around the country and world What type of market is the currency market? – Auction Market The U.S. represents what percentage of global growth? – 1/3 of global growth Why do people want to own dollars? – Not considered to be politically volatile – Easier to handle and liquidate than gold – Considered to be a safe store of value Why do people around the world have to own different currencies? – Safety and diversification – Settle payments

Final Comprehension Question!!! Explain the following: Recently, the Federal Reserve Chairman Ben Bernanke made comments eluding to future actions to help stabilize the economy. Such actions would include stimulating the U.S. economy by printing more money to act as a stimulus. What do you think happened to the value of the US dollar relative to foreign currencies?