International finance coursework Example | Topics and Well Written Essays - 750 words

International finance - Coursework Example (2 marks) False, only silver will be able to circulate because the equilibrium ratio will be raised by the increase in supply of silver and everyone would hoard gold and spend silver since there is no free coinage (Ghosh & Clark, 98). Question 2: The graph below is the exchange rate of Japanese Yen to US dollar ( ¥/$) between August to November 2010. On 15th Sept, Yen moved from 83 to 85.7 yen per dollar due to the Japanese authorities’ intervention in the foreign exchange markets to weaken the value of the yen against the dollar, a day after the yen hit a 15-year high against the dollar. Japanese central bank intervened by setting aside or creating a substantial amount of Yen currency (printing money) which is used in buying several billions of  US dollars. This is then invested in in the US securities thereby increasing the supply of Yen in the market. This then weakened the value of the Yen against the dollar thereby improving exports thus lifting the country out of a deflationary period. The weakening Yen against Us dollars had to be strengthened and to be stabilized as well so as to increase market confidence. The intervention was also carried out to correct the rates of exchange so as to avoid overshooting in any given direction. The government wanted to weaken the value of the Yen against the dollar so as to improve their exports so as to lift the country out of a deflationary period. Yes, it weakened the Yen against the dollar. The exchange rate of Yen reduced considerably thereby favouring the country’s exports. The intervention was able to correct the rate of exchange thereby avoiding overshooting of either direction. Additionally, Japan was able to improve their exports hence lifting the country out of a deflationary period (HüFner, 128). Show how you can make a triangular arbitrage profit by