7 AIMS: Foreign exchange ƒ To learn about: exchange rates; foreign exchange trading; key vocabulary of exchange rates ƒ To learn how to: talk about graphs and charts ƒ To practise: describing a graph related to your work Lead in o How many different currencies can you name? o How is the value (the exchange rate) of your currency determined? o Has the exchange rate, compared to the US dollar or the euro, remained constant over the last few years? o Do you know the history of your currency over the past 50 years? Reading 1: Exchange rates Look at the time line below, showing key dates in the development of exchange rate systems around the world Match the dates with the events (a-e) below 1944 1971 1973 1992 2002 Most industrialized countries switched to a system of floating rates However, governments and central banks occasionally attempted to influence exchange rates by intervening in the markets So there was a system of managed floating exchange rates The Bank of England lost over £5 billion in one day attempting to protect the value of the pound sterling After this, governments and central banks intervened much less, so there was almost a freely floating system Unit 7: Foreign exchange 60 A fixed exchange rate system was started The values of many major currencies were pegged (or fixed) to the value of the US dollar The American central bank, the Federal Reserve, guaranteed that it could exchange an ounce of gold for $35 Twelve states of the European Union introduced a single currency, the euro, to replace their national currencies Gold convertibility ended because the Federal Reserve no longer had enough gold to back the dollar, due to inflation Reading 2: Freely floating exchange rates Peter Sinclair presents about the potential problems of freely floating exchange rates, and answer the questions I think a lot of people would say that there's been an important trend towards more flexibility in exchange rates So, for example, the pound now floats freely in terms of other currencies, the central bank doesn't intervene - only very, very rarely - and that's true for an increasing number of countries the market system is now doing, say in the case of sterling, what central banks and finance ministries used to in the past, which is trying to pick and stick to an appropriate level for the currency But there are problems with the markets: markets are not perfect One problem is that nobody knows the future and if there is an unexpected piece of news about a country, say you discover a vast amount of oil or the government suddenly falls and is likely to be replaced by one which has a very different financial, tax, or monetary policy, then everybody will suddenly wake up and say, 'Hey this is a country whose currency we must buy lots of' or 'This is now really unsafe, we must get out.' And the swings in exchange rates can be absolutely enormous, you can see a currency go up or down by one, two, three percent maybe in a day, in response to certain news a lot of the people who are operating in foreign exchange markets don't tend to think so much about the long run and what the currency really ought to be worth in order for its goods to be priced at the right level in foreign markets and so on They're trying to guess very short-term trends, and they're trying to guess the hunches of other traders They tend to say, 'Oh, let's see, if something is going up today it will probably go up tomorrow.' They just go in one direction and you often get huge exchange rate swings, going on for maybe even years, certainly for weeks and months, which are pushing the currency away from what it really ought to be This is a source of worry and it's undoubtedly happening and it's due to the fact that people don't have perfect Unit 7: Foreign exchange 61 information and often tend to say, 'Well, if he's doing this then he must know something I don't, I'd better copy him', and that can be a recipe for real trouble What does Sinclair say is the current trend in exchange rates? ………………………………………………………………………………………………………… What examples does he give of unexpected pieces of news? ………………………………………………………………………………………………………… What can happen to currencies in response to unexpected news? ………………………………………………………………………………………………………… Why can currencies be at the wrong level for long periods of time? ………………………………………………………………………………………………………… Discussion ƒ Has the value of the currency of your country risen or fallen in the past few weeks or months? Do you know why? ƒ What international events you expect to affect exchange rates in the next few weeks or months? Why and how? ƒ How could you attempt to profit from these changes, if you had a large amount of cash at your disposal? Reading 3: Currency trading You are going to read a text about online currency trading Before you read, answer the following questions Why people buy and sell currencies? ………………………………………………………………………………………………………… What you think the world's seven major currencies are? ………………………………………………………………………………………………………… Now read the text and - using your own words as much as possible - write seven statements about the following figures: a 5% e 1,000,000,000,000 b 30 f 24 c 85% g 95% d Unit 7: Foreign exchange 62 Find the words in the text that mean the following: the total amount of money spent in a market people who buy and sell things in the hope of making a profit another word for stocks and shares easy to sell (to convert into cash) belonging to one's own country price change Unit 7: Foreign exchange 63 Language focus Describing trends and graphs If we want to show changes in the value of a currency, trends in the economy or any other quantities which change over time, we often use graphs There are a number of commonly used words and phrases to describe upward and downward movement, as well as the rate and size of the change The phrases in the box are used to describe trends and graphs Put them in the table below, according to the word category One has been done for you dramatic increase gradual rise rapid decline fall sharply level off slight drop gradually decrease moderate growth sudden climb Speed Size Verbs Nouns Look at the graph showing the development of the USD/ GBP exchange rate and complete the description using words and phrases from the box Unit 7: Foreign exchange 64 Choose the correct answer: Employees’ and officers’ salaries, utility bills, stationery and office supplies are …………….expenses A general and administrative B depreciation C selling D production The purpose of cost accounting is to establish the that ensures a profit A break-even point B selling price C standard cost D factory cost ……………is a document requesting a supplier to deliver specified goods A Purchase order B Store requisition slip C Receiving report D Overhead …………… is the portion of a corporation’s earnings paid to its stockholders A Dividend B Share C Income D Benefit ………… is the income that is not paid out by a business to its stockholders as dividends, often used for investment or expansion A Retained earning B Net income C EBT D Gross income …………… is an accounting function that involves the review and evaluation of financial records A Auditing B Budgeting C Costing D Taxing Indicate which of the following item is a manufacturing business A Shoes shop B Dental practice C Travel agency D Sugar refinery On 1st March, the company purchased a machine valued at $120,000 included VAT A deposit of $20,000 cash was paid and a mortgage loan obtained for the remaining How many accounts are affected by this transaction? A two accounts B three accounts C four accounts D five accounts Unit 7: Foreign exchange 65 Which of the following items is not an example of current assets? A debtors B franchises C cash 10 ……….the pattern in which cash moves in and out of the firm A Cash disbursement B Cash expenditure C Cash flow D inventories D Cash receipt New words: − foreign exchange : ngoại hối − switch to (v) : chuyển sang − floating rate (n) : mức thay đổi − float (v) : trôi lơ lửng − occasionally (adv) : thỉnh thoảng, − intervene [,intə'vi:n] (v) : xen vào , can thiệp − peg (v) : ổn định (giá cả), đóng chốt − federal reserve (n) : Cục Dự Trữ Liên Bang − ounce (n) : đơn vị đo lường , = 28,35g − European Union (n) : Liên Minh Châu Âu − replace (v) : thay − convertibility (n) : việc hốn đổi, thay đổi − convert (v) : đổi, biến đổi − due to : − in response to : hưởng ứng, đáp ứng − flexibility (n) : tính linh hoạt − stick to : bám vào, gắn bó với − appropriate (adj) : phù hợp − swing (v) : đung đưa − swing (n) : (giá cả) lên xuống đều − enormous (adj) : to lớn − worth (adj) : xứng đáng, đáng giá − hunch (n) : miếng to , linh cảm − direction (n) : hướng − undoubted (adj) : hồi nghi − recipe (n) : cơng thức Unit 7: Foreign exchange 66 − disposal (n) : việc bán, chuyển nhượng − affect (v) : ảnh hưởng − turnover (n) : doanh thu − combined volume : số lượng tổng hợp − simultaneous (adj) : đồng thời − trillion : nghìn tỷ − speculator (n) : người hay suy đốn, kẻ đầu − liquid (adj) : (tiền) mặt − fluctuation (n) : dao động − OTC market : over-the-counter market : thị trường Sở giao dịch chứng khoán = Outside market − Interbank market : thị trường liên ngân hàng − conduct (v) : thực − counterpart (n) : bên đối tác − centralize (v) : tập trung − via : qua − rapid (adj) = fast : − dramatic (adj) : đáng kể − moderate (adj) : vừa phải − slight (adj) : nhẹ, mong manh − sharply (adv) : nhanh chóng , mau mắn, rõ ràng − steadily (adv) : đặn − peak (v) : đạt tới đỉnh cao − devalue (v) : giảm giá trị, giá − slide (v) : trượt, chuyển động nhẹ nhàng ………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………… Unit 7: Foreign exchange 67 ... recipe (n) : cơng thức Unit 7: Foreign exchange 66 − disposal (n) : việc bán, chuyển nhượng − affect (v) : ảnh hưởng − turnover (n) : doanh thu − combined volume : số lượng tổng hợp − simultaneous... Income D Benefit ………… is the income that is not paid out by a business to its stockholders as dividends, often used for investment or expansion A Retained earning B Net income C EBT D Gross income... graph showing the development of the USD/ GBP exchange rate and complete the description using words and phrases from the box Unit 7: Foreign exchange 64 Choose the correct answer: Employees’ and