Since I have forgotten to post this exchange rate for over a week, I figured that I should publish the latest exchange rate. 1 USD = 4.20223 ILS (Israel New Shekel).
Archive for February, 2007
Israel Exchange Rate (as of February 27, 2007)
February 27, 2007Russian Trading System (RTS)
February 27, 2007The Russian stock exchange is known as the RTS, which was first indexed on September 1, 1995 with a value of 100. As of February 27, 2007, the index value is 1,906.08. Looking at the RTS website (http://www.rts.ru/en/), I found out that the index is calculated based on the 50 most liquid and largest cap stocks picked by the RTS Committee. Below is a graph of the RTS index since its start in 1995.
Protected: Capital Flows Article from The Economist
February 20, 2007Trying to Understand International Banking Facilities (IBFs)
February 19, 2007I have found a good site on the Federal Reserve’s website that discusses these IBFs. From what I have gathered, they enable depository institutions to accept deposits and offer loans to foreign businesses and customers. IBFs aren’t under the jurisdiction of certain interest rate restrictions and are free from the Federal Reserve System’s reserve requirements while also enjoying some state/local tax exemptions. According to the description provided by the Federal Reserve Bank of New York, they offer short-term deposit maturities, large denomination time deposits, and may transact business in foreign currency. From what I have gathered, these International Banking Facilities are a branch of American banks that are established to do Eurocurrency business with foreign customers. I still can’t differentiate between IBFs and offshore banks. To me, offshore banking provies even fewer restrictions and regulations than IBFs, especially in the way of account privacy and the ease to which money laundering and other trafficking activities can be completed. Even though International Banking Facilities aren’t under the subjugation of the Federal Reserve System reserve requirements, detailed ledgers and logs (separate from the U.S. transactions) must still be maintained, so consequently, illegal activities seems to be more easily monitored within the confines of the United States than when someone conducts financial activities on their accounts outside of the U.S.
Source: Federal Reserve Bank of New York: International Banking Facilities
Protected: Arbitrage Article from The Economist
February 10, 2007Israel Exchange Rate (as of February 8, 2007)
February 9, 2007The current exchange rate for the Israel New Shekel is 1 USD = 4.22796 ILS (from http://www.xe.com). The Israel New Shekel, which equaled 1,000 old shekels, came into circulation by the Bank of Israel in 1985 as a result of 180% inflation from the previous year. I wish there was interesting facts about the Israeli currency, but at this point, I can’t find much. I have explored the Bank of Israel and briefly read through the recent inflation reports, which had mentioned slow appreciations from July-October 2006 as a result of global developments and a weaking of the USD. By the end of 2006, the CPI fell by 1.7 percent. The thing that doesn’t make sense is that even though the CPI decreased, the report mentions that the shekel appreciated due to the increased consumer demand resulting from a decline in the world energy prices. If the shekel is appreciating, shouldn’t prices be rising, not falling (as indicated from the CPI)?
Source: Bank of Israel Inflation Reports (2006)
Economy of China: Is it Overheating?
February 9, 2007I know that I don’t have a sufficient background on the Chinese economy. However, since the yuan was unpegged from the U.S. dollar in 2005 and since the United States (China’s largest importer) is starting to import less from China as a result of the slowly appreciating yuan, China has to find ways to stimulate its domestic demand. Dave’s trade finance article as well as my most recent article, discusses an “overheating” Chinese economy. Nevertheless, I just found an article on Forbes’ website http://www.forbes.com/business/2006/04/21/china-economy-growth-cx_0424oxford.html that claims the economy isn’t overheating. While I can’t find more resources on the current conditions of the economy at this moment, I can’t see why the authors think that the economy isn’t overheating. The article even makes the claim that the money supply is increasing with an increasing trade surplus (as the U.S. is importing less goods), but this doesn’t add up to the line of reasoning from my article or Dave’s. Both of our articles discuss a rising interest rate. The only way that the interest rate could increase with an increasing money supply is if the demand for money increases more than the supply of money. However, I cannot confirm if this line of reasoning is accurate for the Chinese economy at this time.
My question for anybody who has an answer is what China should do to most efficiently stimulate its domestic economy so as to compensate for a recent decrease in imports by the United States. I have tried to look for articles or even theoretical papers on domestic investment for stimulation, but I have not had luck thus far.
Protected: Trade Finance Article from The Economist
February 4, 2007A Look at 3-month CD and 3-month Eurodollar Interest Rates
February 2, 2007Following our class discussion today on eurocurrency and interest rates, I went to the Federal Reserve website and obtained interest rates for both the 3-month Eurodollar deposits as well as the interest rates for 3-month CDs. I plotted the data for a one-year period (from February 3, 2006, to January 26, 2007) and found that the two interest rates parallel each other’s movements. The interest rate for the Eurodollar, however, has remained slightly higher than the 3-month CD. Currently, the 3-month Eurodollar is roughly 0.03 percentage points higher than the 3-month CD. (The link below is a one-year graph of the two interest rates.)
3-month CD and 3-month Eurodollar Interest Rate
Source: Federal Reserve Board Statistical Release H15: Selected Interest Rates (January 29, 2007)
Bank’s Inventory of Foreign Currency
February 1, 2007Going back over my notes from the 1/31 class, I am still a little confused about the example with the purchase of 300 GBP (British Pound) of ale. The example talked about the bank needing to increase its inventory of British Pounds because it had to transfer the 300 GBP to a U.S. importer. I guess, how does the British bank determine how much it needs in its inventory for British Pounds when it enters the wholesale market? Since there are less regulations (or no banking regulations) in some countries outside of the United States, does this bank know that it needs to increase its inventory in British Pounds because it deals with “x” amount of transactions per day requiring a certain inventory? If somebody knows the answer and can help me out as to why they would increase their inventory, that would be helpful.
