Institute of Business Administration

Jahangirnagar University

Course Code: FIN503

International Financial Management

“Assignment-03”

Submitted to:
Md. Alamgir Hossen
Associate Professor
IBA-JU

Submitted by:
Gazi Md. Ifthakhar Hossain
ID# 201803063
(Batch-19)
Slot-S2

Date of Submission: March 11, 2023.

 History of Exchange Rate

Exchange Rate:

An exchange rate is the value of one currency in relation to another. It represents the rate at
which one currency can be exchanged for another. Exchange rates are determined by a variety
of factors, including supply and demand for the currencies, the strength of the economies and
political stability of the countries whose currencies are being exchanged, and government
policies such as monetary and fiscal policies.

Exchange rates are important for international trade and investment, as they affect the price of
goods and services traded between countries, as well as the returns on investments denominated
in different currencies. Changes in exchange rates can have significant impacts on businesses,
consumers, and economies, and are closely monitored by governments, central banks, and
financial markets.

History of Exchange Rate:

The concept of exchange rates dates back to ancient times, when people would exchange goods
and services through bartering. However, the modern system of exchange rates and currency
markets developed over the past few centuries.

The first official exchange rate system was established in the 19th century with the gold
standard, which tied the value of national currencies to a fixed amount of gold. Under this
system, countries could exchange their currencies for gold at a fixed rate. However, the gold
standard was abandoned during World War I due to financial pressures caused by the war.

In the aftermath of World War II, the Bretton Woods system was established, which fixed the
value of national currencies to the US dollar, which was in turn convertible to gold at a fixed
rate. This system remained in place until the early 1970s, when the US government ended the
convertibility of the dollar to gold, leading to a floating exchange rate system where currencies
were no longer tied to a fixed rate.

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Since then, exchange rates have fluctuated based on a variety of factors, including economic
growth and stability, inflation rates, interest rates, political stability, and global events such as
natural disasters and geopolitical tensions. Today, exchange rates are determined by market
forces through supply and demand of currencies, with central banks and governments
sometimes intervening to influence the value of their currency.

Exchange rates are closely watched by businesses, investors, and governments, as they can
affect the cost of goods and services, the profitability of investments, and the competitiveness
of economies. As a result, there are many tools and resources available to monitor and analyze
exchange rates, such as financial news outlets, currency trading platforms, and economic data
releases.

Exchange Rate in Recent World:

Exchange rates in recent times have been impacted by a range of economic, political, and global
developments. Some notable trends and events that have affected exchange rates in recent years
include:

• COVID-19 pandemic: The pandemic has had a significant impact on global economies,
leading to changes in exchange rates. In general, currencies of countries that have been
hit hard by the pandemic, such as emerging markets, have weakened against major
currencies.
• Trade tensions: Tensions between major trading partners such as the US and China have
led to fluctuations in exchange rates. For example, when the US and China engaged in
a trade war, the Chinese yuan weakened against the US dollar.
• Central bank policies: Central bank policies, such as interest rate changes and
quantitative easing, can also affect exchange rates. For example, when the US Federal
Reserve lowered interest rates in response to the pandemic, the US dollar weakened
against other currencies.
• Political developments: Political developments, such as Brexit, can also affect
exchange rates. When the UK voted to leave the European Union, the British pound
weakened significantly against other major currencies.

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Overall, exchange rates in recent years have been characterized by volatility and uncertainty,
driven by a range of economic, political, and global factors.

Exchange Rate History in Bangladesh

The exchange rate history of Bangladesh has been shaped by a range of factors, including
economic growth, political stability, and global events.

When Bangladesh gained independence from Pakistan in 1971, the new country faced a range
of economic challenges, including a lack of foreign currency reserves and a high level of
inflation. In the early years of independence, the Bangladeshi taka was pegged to the US dollar
at a fixed rate, but this system was abandoned in the early 1970s.

From the 1970s to the early 1990s, the taka experienced significant fluctuations against the US
dollar and other major currencies. This was partly due to the global oil crisis in the 1970s,
which led to inflation and currency devaluations in many countries. In the 1980s, Bangladesh
implemented a range of economic reforms, including measures to increase exports and reduce
inflation, which helped stabilize the exchange rate.

In the 1990s and 2000s, Bangladesh experienced steady economic growth and political
stability, which helped the taka maintain a relatively stable exchange rate. In recent years,
however, the taka has weakened somewhat against major currencies such as the US dollar, due
in part to a widening trade deficit and a decrease in foreign investment.

As of March 11th, 2023, the exchange rate between the Bangladeshi taka and the US dollar is
approximately 1 USD to 104.90 BDT. However, this exchange rate can fluctuate over time
based on a variety of economic and political factors.

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