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ROLL NOS – 16
FS-2
TABLE OF CONTENTS
1 Executive Summary 3
2 Indian Economy 4
3 Chinese Economy 5
4 Currency tracking 9
5 Currency Movement 11
9 16
Analysis and Conclusion
Executive Summary
Currency Project gains relevance due to the importance of global economy and its
ramifications on the international financial sector. The approach has been to
integrate the theoretical aspects such as PPP Model, International Fisher Effect,
Technical & Fundamental Analysis, and Quantitative applications along with the
practical developments in Multinational Business Finance. The project attempts to
analyses the information and develops an interpretation of the facts which is
characterized by its brevity in representation.
CHINA GDP G
RATE
The Chinese economy expanded 10.30 percent over the last year, as measured by
the year-over-year change in Gross Domestic Product (GDP YoY). Unlike the
commonly used quarterly GDP growth rate, the annual GDP growth rate takes into
account a full year of economic activity, thus avoiding the need to make any type of
seasonal adjustment. The China Gross Domestic Product is worth 4327 billion
dollars or 6.98% of the world economy, according to the World Bank.
INFLATION RATE
INDIA INFLATION RATE
The inflation rate in India was 13.91 percent in May of 2010. Inflation rate refers to a general rise in prices
measured against a standard level of purchasing power. The most well known measures of Inflation are
the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of
the domestic economy
China urged the United States to lift restrictions on exports to China as early
as possible, Commerce Minister Chen Deming said ahead of talks between
the two countries in Beijing. The US wants a change in the valuation of the
Yuan while China has called on Washington to relax its laws on technology
exports to Beijing
Treasury Secretary Timothy Geithner and Italian Prime Minister Silvio Berlusconi
sought to support the battered euro on Wednesday, but the currency extended its
decline on a report that China was reviewing its euro holdings. Geithner told
Europeans that financial markets want to see euro zone countries put into action
their $1 trillion standby package designed to stabilize the currency, and Berlusconi
called on European partners to follow his lead and impose austerity to help solve
the euro zone debt crisis
THEORIES
CNY INR
INFLATION RATE(CPI) -1.80 9.29
INTEREST RATE(BANK 5.31 3.25
RATE)
ih = Inflation rate of us
t = Time period
Inflation
Rates
INR CNY
-
11.89 1.80
% %
(1- 0.018)]^t
et = 0.13991 (1.01189)^1
(0.98)^1
t = time period
Interest
Rates
INR CHY
5.31
3.25% %
et = 0.13991 (1 + 0.0325)^t
(1 + 0.0531)^t
et = 0.13991 (1.0325)^1
(1.0531)^1
Conclusion
The observations as per:
1. PPP Theory
2. IFE Theory
c. The interest rates in China did not move at all and were recorded
constant at 5.31%. While in India the interest rates fell down by
75 basis points i.e. from 4 to 3.25.
Bibliography
• http://inr.cer24.com/cny/history/?q=365
• http://tradingeconomics.com/
• http://www.xe.com/
• http://www.exchange-rates.org/
• http://www.fxstreet.com/
• http://economictimes.indiatimes.com