• From the The Pacific Exchange Rate Service or from FRED website download graphs of monthly Spot exchange rates for the European Euro, British Pound and Brazilian Real relative to the US dollar since January 2000. (If you download data to Excel you can make your own graph in Excel: (InsertLine Plot)).

Questions: Did the USD appreciate/depreciate relative to these currencies during the crisis 2008-2009? What could be a reason for this? What was the most recent US dollar dynamics versus these currencies?

• Triangular Arbitrage

Assuming the following quotes, calculate how a market trader at Citibank with $1,000,000 can make an intermarket arbitrage profit:

Citibank quotes U.S. dollar per pound:		$1.5900/
National Westminster quotes euros per pound:		?1.2000/
Deutschebank quotes U.S. dollar per euro:		$1.3245/?

BOP of China

Use the following Chinese (Mainland) balance of payments data from the IMF:

China?s (Mainland) BOP
Assumptions (million US$)	2006	2007	2008	2009	2010
Current account balance	232,746	353,996	412,364	261,120	305,374
Financial account balance	52,649	95,148	46,321	180,813	226,044
Net errors and omissions	-744	11,507	20,868	-41,425	-59,759
Reserves and related items	-284,651	-460,651	-479,553	-400,508	-471,659

• Did China experience Current Account surplus or deficit during five years 2006-2010?
• Did China experiencing a net capital inflow or outflow during five years 2006-2010?
• Did Chinese central bank buy or sell the Chinese currency during five years 2006-2010?
• Did the Balance of Payments identity hold for any year during five years 2006-2010? Show numerically whether it did or not hold for any year.

1. From the The Pacific Exchange Rate Service or from FRED website download graphs of monthly Spot exchange rates for the European Euro, British Pound and Brazilian Real relative to the US dollar since January 2000. (If you download data to Excel you can make your own graph in Excel: (InsertLine Plot)). Questions: Did the USD appreciate/depreciate relative to these currencies during the crisis 2008-2009? What could be a reason for this? What was the most recent US dollar dynamics versus these currencies? 2. Triangular Arbitrage Assuming the following quotes, calculate how a market trader at Citibank with $1,000,000 can make an intermarket arbitrage profit: Citibank quotes U.S. dollar per pound: National Westminster quotes euros per pound: $1.5900/ 1.2000/ Deutschebank quotes U.S. dollar per euro: $1.3245/ 3. BOP of China Use the following Chinese (Mainland) balance of payments data from the IMF: China's (Mainland) BOP Assumptions (million US$) Current account balance Financial account balance Net errors and omissions Reserves and related items 2006 232,746 52,649 -744 -284,651 2007 353,996 95,148 11,507 -460,651 2008 412,364 46,321 20,868 -479,553 2009 261,120 180,813 -41,425 -400,508 2010 305,374 226,044 -59,759 -471,659 Questions: (a) Did China experience Current Account surplus or deficit during five years 20062010? (b) Did China experiencing a net capital inflow or outflow during five years 2006-2010? (c) Did Chinese central bank buy or sell the Chinese currency during five years 20062010? (d) Did the Balance of Payments identity hold for any year during five years 2006-2010? Show numerically whether it did or not hold for any year. 1 2