Currency Exchange

Different currencies have different

values
 Currency Values
• Different world currencies have different values.
These values depend on many things including:
– the strength of the home country’s economy
• a strong economy means investors feel it is safe to buy that
country’s currency
– interest rates in that country
• higher interest rates in a country mean that that country’s
currency can earn more money in the bank
– political situation in that country
• when there is uncertainty about government (e.g. around
elections), a country’s currency is often devalued
 Currency Values
• Currency values are always changing. To
find current exchange rates, one can look
on the Internet or go to a bank or currency
exchange agent.
• The official exchange rate of a currency is
usually determined by investors.
However, some countries fix the exchange
rate of their currency to a steady, stable
currency (like the US dollar or the Euro).
 Interesting things about currency
• European countries all used to have their own
currencies. The Euro was introduced in 1999
(and 2002), and replaced all these currencies.
• Some European countries kept their own
currency:
– Switzerland, which likes to have control over its own
banks
– Great Britain, which likes to be autonomous and
doesn’t consider itself fully part of Europe
• The Canadian dollar has been worth less than
$0.60 US and over $1.05 US in Mr. Plett’s
lifetime.
Currency Exchange Rates
 Exchanging Money
• A person cannot exchange money at the
official exchange rate. This is because the
banks/agents performing the conversion
need to cover their costs.
• Also, because currency values fluctuate,
they need to protect themselves in case
the currency’s value decreases between
when they buy it from you and when they
sell it to the next person.
Practice
What will the price be…
…if you buy 120 pounds sterling?
…if you buy 100 US dollars?
…if you buy 150 pounds sterling?
…if you sell 120 Australian dollars?
…if you buy 130 yen?
…if you buy 200 Euros?
…if you buy 170 US dollars?
…if you sell 80 yen?
…if you buy 110 Euros?
…if you sell 90 US dollars?
…if you sell 180 Euros?