Foreign Exchange

Rate Quotations
 Foreign exchange rate quotations can be found in The Wall
Street Journal and in other leading print publications and on
web sites. Exchange rates are given two different ways. As
shown in Table 19-1, which is an excerpt from The Wall Street
Journal Online, in Column 1, they are quoted as “USD
equivalent”, in Column 2, they are quoted as “Currency per
USD.”
 For Example, 1 Japanese yen is worth (or can be exchanged for)
0.01095 U.S. dollar, or 1 U.S. dollar can buy 91.3404 Japanese
yen

Japanese Yen: 1/0.01095 = 91.3414

1/91.3414 = 0.01095
Cross Rates

 The exchange rate between any two currencies.

 Situation
 Suppose, though, that a German executive is flying to Tokyo on
business. The exchange rate in which he or she is interested is not
euros or yen per dollar-rather, the issue is how many yen can be
purchased with a euro. This is called a cross rate and it can be
calculated from the following data from Column 2 of Table 19-1
Spot Rate
Euro €0.6797/$1
Yen ¥91.3404/$1
 Because the quotations have the same denominator, we can calculate
the cross rate between these currencies by using the Column 2
quotations. For our German national, the cross rates are found as
follows

Euro/Yen exchange rate = Euro/$

Yen/$
 And when we cancel the dollar signs, we are left with the number of
euros that one yen could purchase:

€0.6797/ ¥91.3404 = €0.0074/ ¥

 Alternatively, we could find the number of yen that one euro could buy if the
two are reciprocated:
¥91.3404/ €0.6797 = ¥134.38/ €
The wall street Journal Online Exchange Rates
Table 19-1 Direct Quotation: Indirect quotation:
U.S. dollar required to Number of units of
buy one unit of foreign foreign currency per
currency (1) U.S. dollar (2)
Australian dollar $0.8724 1.1462
British pound 1.6521 0.6053
Chinese yuan 0.1465 6.8264
Euro 1.4712 0.6797
Honk Kong dollar 0.1290 7.7502
Indian rupee 0.0208 48.1552
Indonesia rupiah 0.0001 9696.69
Japanese yen 0.0109 91.3404
Korean won 0.0008 1204.55
Malaysia ringgit 0.2881 3.4705
New Zealand dollar 0.7105 1.4078
Philippine Peso 0.0196 51.0204
Interbank Foreign Currency Quotations

 There are two ways to state the exchange rate between two
currencies, in either American or European terms.

 Accordingly, we need to designate one of the currencies as the

“home” currency and the other as the “foreign” currency.

 The designation is arbitrary.

Exchange rates are given two
different ways:
 Direct quotations
 The home currency price of one unit of the foreign currency
 Indirect Quotations
 The foreign currency price of one unit of the home currency
The wall street Journal Online Exchange Rates

Table 19-2 US dollar Euro Pound SFranc Peso Yen Cdn Dlr
(1) (2) (3) (4) (5) (6) (7)

Canada 1.065 1.5688 1.7576 1.0333 1.0333 0.0117 ---

Japan 90.81 133.77 149.87 88.133 88.113 --- 85.271

Mexico 13.177 19.11 21.747 12.786 12.786 0.1451 12.373

Switzerland 1.0306 1.5182 1.1204 --- --- 0.0113 0.9677

United Kingdom 0.6059 0.8926 --- 0.5879 0.5879 0.0067 0.569

Euro 0.6758 --- 1.1204 0.6587 0.6587 0.0075 0.6374

United States --- 1.4731 1.6504 0.9703 0.9703 0.011 0.939