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    Tutorial Money Market

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    Hasya Auni
    The key differences between money and foreign exchange markets are that money markets deal with short-term loans up to 12 months for businesses and households, while foreign exchange markets involve the buying and selling of global currencies. A drop in the value of the Malaysian ringgit could benefit exports by making Malaysian goods cheaper overseas and attracting more foreign investment into Malaysia. A domestic currency can strengthen against the US dollar due to higher demand for the domestic country's exports increasing demand for its currency.

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    Tutorial Money Market

    Uploaded by

    Hasya Auni
    21 views2 pages
    The key differences between money and foreign exchange markets are that money markets deal with short-term loans up to 12 months for businesses and households, while foreign exchange markets involve the buying and selling of global currencies. A drop in the value of the Malaysian ringgit could benefit exports by making Malaysian goods cheaper overseas and attracting more foreign investment into Malaysia. A domestic currency can strengthen against the US dollar due to higher demand for the domestic country's exports increasing demand for its currency.

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    Tutorial Money market

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    The key differences between money and foreign exchange markets are that money markets deal with short-term loans up to 12 months for businesses and households, while foreign exchange markets involve the buying and selling of global currencies. A drop in the value of the Malaysian ringgit could benefit exports by making Malaysian goods cheaper overseas and attracting more foreign investment into Malaysia. A domestic currency can strengthen against the US dollar due to higher demand for the domestic country's exports increasing demand for its currency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    21 views2 pages

    Tutorial Money Market

    Uploaded by

    Hasya Auni
    The key differences between money and foreign exchange markets are that money markets deal with short-term loans up to 12 months for businesses and households, while foreign exchange markets involve the buying and selling of global currencies. A drop in the value of the Malaysian ringgit could benefit exports by making Malaysian goods cheaper overseas and attracting more foreign investment into Malaysia. A domestic currency can strengthen against the US dollar due to higher demand for the domestic country's exports increasing demand for its currency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    1. What are the differences between money and foreign exchange market?

    Money Market Foreign Exchange Market


    Market for short-term loan finance for There are willing buyers and sellers of
    businesses and households the currency, who may be spread across
    the globe.
    Money is borrowed and lent normally up The exchange rate is defined as the cost
    to 12 months of exchanging two currencies.
    High Liquidity High Liquidity
    Low risk of default by issuer 24-hour market.
    High marketability by money market Market rates are indicated, and deals are
    instrument, transacted via a network of international
    dealing system

    2. Explain how a drop in the value of MYR could affect the Malaysian export and
    import?
    • The weakening ringgit can be beneficial to Malaysian businesses because foreign
    markets can now afford to buy Malaysian-made goods. Increased demand for
    domestic products will almost certainly result in higher profits for certain
    businesses, such as the manufacturing sector. Export-oriented businesses that sell
    their products in international markets will benefit from the weak ringgit because
    their sales volume will increase. Overall, there will be an increase in exports for
    some economic sectors.
    • Because it is cheaper to operate and buy stocks and bonds in Malaysia, a weak
    ringgit will encourage foreigners to invest through foreign direct investment (FDI)
    and foreign investment portfolios. While the effects of foreign investment portfolio
    capital flow are not immediately felt by citizens, FDI can create job opportunities
    in the market as multinational companies construct new facilities to conduct
    business in the country.
    3. Explain the factors that strengthen a domestic currency against USD?
    • The supply and demand interaction strengthens a domestic currency against the US
    dollar. When a country exports goods and services to the market, it indicates that there
    is a demand for those goods and services, and that buyers will have to convert their
    currency to pay for them. As an example, if there is a high demand for USD products
    on the market, the value of the USD is likely to rise, and vice versa. The local
    currency's value will depreciate. The USD will rise because of USD buyers' buying
    activity appreciate in value when compared to the local currency However, if there is
    a market demand for domestic products, as the profit grows, so does the value of the
    local currency.
    4. The USD/RM is quoted at 4.3312/4.3333. How much MYR will the exporter receive
    for US$2 mil proceeds? How much importer pays for US$500,000 imports?
    • Exporter receives:
    US$ 2,000,000 * 4.3333
    = RM 8,666,600
    • Importer pays:
    US$ 500,000 * 4.3312
    = RM2,165,600
    5. Explain ‘take profit strategy’ and ‘stop loss strategy’.
    A take profit strategy is one in which you profit from a profitable position. When
    the market reaches a specific price, this strategy will assist investors in gaining a higher
    profit. Taking profit allows investors to reduce risk by exiting the market once it reaches
    the target price. This allows investors to take advantage of the high profit potential
    while limiting their exposure to market risk.
    When an asset reaches a certain level, investors use a stop loss strategy to buy
    or sell it on the market. This strategy allowed investors to limit their losses and move
    quickly in the market in order to avoid being exposed. Not only can investors avoid
    uncontrollable losses, but they can also avoid large losses when the market price of
    assets falls below a certain level.

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