Eco 372 Week 2 Assignment

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For this week’s assignment in currency conversion, I chose to convert the price of a pair of $105 jeans from U.S. Dollars to the Belizean dollar, the Euro and the Japanese Yen. The Euro had the closest value of the U.S. Dollar. $105 USD converts to 98.9415 EUR. 1 EUR = 1.06123 USD. The Belizean Dollar conversion came out to 211.067 BZD. 1 USD = 2.01016 BZD. The Japanese Yen had the largest difference in value of the three countries I chose from the U.S. Dollar. A $105 USD pair of jeans would cost 11,405.89 JPY in Japan. 1 USD = 108.628 JPY. As you can see from the above currency conversion, there is a vast difference from each area of the world. Global currency conversion varies from country to country. Numerous factors determine exchange rates and are all related to the trading relationship…show more content…
If interest rates increase, it will become attractive to invest money in that country because investors will get a higher return from savings in that country’s banks. Therefore the currency demand will rise. But higher interest rates will have a negative impact on the country. This is due to the reduction in purchasing power of the consumer while the loan borrowers have to pay more interest. Foreign investors are attracted towards a country that has a strong economy. This leads to better valuation of the currency. Increasing budget deficits of governments lead to the decreasing valuation of currency. When it minimizes, the currency value makes a favorable, more prominent exchange rate. The balance of trade is the difference between the value of exports and the value of imports. If the difference is positive, a trade surplus is produced and is favorable for the domestic currency. If the difference is negative, a trade deficit is produced. Social and political changes also effect the valuation of the country’s currency. Political stability is a very important factor regarding the future

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