Exchange RateBy : Ayu Tiara (B12112023)

Exchange Rate??

Price for which the currency of a country can be exchanged for another country's currency. –BusinessDictionary.com-

An exchange rate (also known as a foreign-exchange rate, forex rate, FX rate or Agio) between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency. –Wikipedia-

Exchange Rate Regime

• Fixed Exchange Rate

• Free Floating Exchange Rate

• Manage Floating Exchange Rate

• Pegged Exchange Rate

• Currency Board/Basket of Curencies

The above map shows which countries have adopted which exchange rate regime. Dark green is for free

float, neon green is for managed float, blue is for currency peg, and red is for countries that use another

country's currency.

Source: Boundless. “Exchange Rate Systems.”Boundless Economics.

Quotation

• Direct quote is a foreign exchange rate quoted as the

domestic currency per unit of the foreign currency. In

other words, it involves quoting in fixed units of foreign

currency against variable amounts of the domestic

currency.

• Indirect quote is a currency quotation in the foreign

exchange markets that expresses the amount of foreign

currency required to buy or sell one unit of the domestic

currency.

A direct quote can be converted to indirect quote by the following formula:

Direct Quote =1

Indirect Quote

Example

• Exchange rate between U.S dollar and Indonesia Rupiah

is Rp12 820.5128 per U.S dollar

• Indirect quotation for Indonesia Rupiah is US$ 7.8 × 10-

5 per IDR (1/12820.518)

Nominal vs Real

• The nominal exchange rate simply states how much of

one currency can be traded for a unit of another

currency.

• The real exchange rate, on the other hand, describes

how many of a good or service in one country can be

traded for one of that good or service in another country.

Factors are Influenced

Exchange Rate• Inflation rate

• Income level

• Interest rate

• Trade balance

• Government control

• Expectation

Indonesian Government Policies

to control Exchage Rate

• Fix the trade deficit by encouraging exports and the level

of tax relief on certain industries.

• Maintain economic growth by ensuring the state budget

deficit remained at 2.38% and keep secure financing.

• Maintain purchasing power, by changing the marketing of

beef and horticulture.

• Accelerating investment to optimize the integrated one-

stop service system for licensing investment.

Conclussion

• Moneter crisis in 1998 and financial crisis in 2008 have

bigger impact to Indonesia exchange rate stability

• Indonesia rupiah is the lowest currency compare to 4

ASEAN country such as Malaysia, Singapore, Thailand,

and Philippine