International Finance - currency Essay Example | Topics and Well Written Essays - 2250 words

International Finance - bills - Essay casefulSame method is applied for obtaining the values mentioned at other places and tables elsewhere as well as in this paper.FOREX experts fantasy that the bruise would begin the year 2003 on an optimistic note but unfortunately for the pound, that year also began with a downward trend against the Euro and act till the year end. The first quarter saw the pound value against euro drip by 5.8% from 1.539429 to 1.449098. It further continued the downward journey to 1.438329 by the end of mo quarter reaching its lowest of the year at 1.397857 on May 30. The decline in the sustain quarter was 0 .7 % and negligible when compared to the first quarter decline. On the whole, the pound dripped by 6.56 % during the first half of the year which had seen the euro rise against the pound from 0.649591to 0.695251. The following table and the subsequent graph show the decline of the pound against the Euro as explained earlier in the first half of the year 2003.The European Central Bank (ECB) has continued with a policy of consistency in bank prescribes boosting up the morale of the Euro in FOREX markets. In January and February, 2003, the Governing Council of ECB decided to continue with existing rates of 3.75% and 1.75 % for marginal lending and deposit facilities respectively. The minimum stir rate on main refinancing operations also continued to be at 3.75% putting at rest all the rumours. This was followed by a report, released on February 24, 2003, that claimed that the solvency levels of EU banks also continued to be plane stronger. The regulatory capital ratio for EU banking system stood at 12% as against the minimum necessity of 8% in the preceding two years of 2001 and 2002, according to this report (Press release, 24 February 2003-EU Banking sphere of influence stability, The banking sector has remained stable).While these decisions helped the Euro maintain its stability and uptrend against the pound, some unfavou rable trends persisted on the home ground for the latter currency adding fuel to the fire. No doubt, the British economy had recorded maximum growth rate in the tierce quarter of 2002 due to buoyancy in consumer spending and rising of prices while the GDP rose by 0.94 % in comparison with the previous quarter. But the largeness rate had crossed the Bank of Englands (BOE) expected mark of 2.5% reaching almost 2.8% in the last quarter (Released on 1/9/03 For 4Jan 2003 ). The BOE defended the inflation rate arguing that the tendency was temporary and had its sources in the rising prices of oil and housing. With a view to gust the inflation trend, the BOE had reduced the refer rate to 3.75 percent from 4%. This was the lowest level borrowing rate in the country since 1955 (Released on 2/6/03 For Feb 2003) and it naturally made the public and FOREX traders lose interest on the pound leading to its continuous downtrend against the Euro. The following table shows how it went down furt her in the randomness half of the year 2003.Date / Month