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    Term 2 Foreign Exchange Week 6

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    Siphumeze Titi
    The document discusses key concepts related to foreign exchange including currencies, exchange rates, and how money spent by international tourists benefits the local South African economy. Specifically, it defines local and foreign currencies, how exchange rates work, factors that influence exchange rate fluctuations, major global currencies and where to exchange currencies. It also explains how foreign tourist spending cascades through the economy via the multiplier effect to benefit local businesses and residents both directly and indirectly.

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    Term 2 Foreign Exchange Week 6

    Uploaded by

    Siphumeze Titi
    56 views10 pages
    The document discusses key concepts related to foreign exchange including currencies, exchange rates, and how money spent by international tourists benefits the local South African economy. Specifically, it defines local and foreign currencies, how exchange rates work, factors that influence exchange rate fluctuations, major global currencies and where to exchange currencies. It also explains how foreign tourist spending cascades through the economy via the multiplier effect to benefit local businesses and residents both directly and indirectly.

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    Term 2 Foreign Exchange week 6

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    The document discusses key concepts related to foreign exchange including currencies, exchange rates, and how money spent by international tourists benefits the local South African economy. Specifically, it defines local and foreign currencies, how exchange rates work, factors that influence exchange rate fluctuations, major global currencies and where to exchange currencies. It also explains how foreign tourist spending cascades through the economy via the multiplier effect to benefit local businesses and residents both directly and indirectly.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    56 views10 pages

    Term 2 Foreign Exchange Week 6

    Uploaded by

    Siphumeze Titi
    The document discusses key concepts related to foreign exchange including currencies, exchange rates, and how money spent by international tourists benefits the local South African economy. Specifically, it defines local and foreign currencies, how exchange rates work, factors that influence exchange rate fluctuations, major global currencies and where to exchange currencies. It also explains how foreign tourist spending cascades through the economy via the multiplier effect to benefit local businesses and residents both directly and indirectly.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    Grade 11 Term 2

    Foreign exchange and its value to


    the South African economy:
    Currencies
    In today’s society, most people use money every day, or almost every day, of their
    lives.
    People need money to pay for food, electricity, transport, school fees, clothing etc.
    The money is called currency
    According to the CAPS document, learners should be
    exposed to the following:
    • Foreign exchange and its value to the South African Economy:
    • Currencies
    • Concepts: local currency, foreign currency, foreign exchange, exchange rate,
    informal fluctuations
    • Major currencies of the world, their currency codes and symbols: US dollar, euro,
    British pound, Japanese yen, Australian dollar, South African rand
    • Facilities where foreign currency can be exchanged, e.g. foreign exchange
    bureaus, commercial banks, etc.
    • How does money spent by inbound international tourists benefit local people?
    Directly and indirectly - the multiplier effect
    Foreign exchange and its value to the South African economy:
    • Currencies

    • Concepts: local currency, foreign currency, foreign exchange, exchange rate,


    informal fluctuations

    • Major currencies of the world, their currency codes and symbols: US dollar,
    Euro, British pound, Japanese yen, Australian dollar, South African rand

    • Facilities where foreign currency can be exchanged, e.g. foreign exchange


    bureaus, commercial banks, etc.

    • How does money spent by inbound international tourists benefit local people?
    Directly and indirectly - the multiplier effect
    LOCAL CURRENCY

    The money that people use in a country is known as its local currency.
    • South Africa’s currency is the South African Rand.
    • Currencies are usually made up of coins and banknotes.
    • In South Africa, we have six coins - 10-cent, 20-cent, 50-cent, one-rand, two-rand, five-
    rand and five banknotes – 10-rand, 20-rand, 50-rand, 100-rand and 200-rand.

    FOREIGN CURRENCY
    • When we refer to the currency of another country, we talk about Foreign currency,
    Foreign Exchange or Forex for short.

    FOREIGN EXCHANGE
    When people exchange their money for another currency, we call it foreign exchange,
    Forex or FX.
    For example, a South African tourist travelling to America will need to exchange South
    African rand to American dollars.
    EXCHANGE RATE

    The exchange rate is the price of one currency expressed in units of another
    currency.
    There are two ways to express the exchange rate:
    • Local currency per unit of foreign currency:
    One US $ 1.00 = R 18.19. Which means that if you buy 1dollar you need to pay R
    18.19.
    If a South African tourist needs: US $10 000.00 to travel in the USA, he/she will pay
    10 000.00 x R18.19 =
    R 181 900.00 to get US $ 10 000.00.
    • Based on foreign currency per unit of local currency.
    • Foreign currency per unit of local currency: R1.00 = Australian $ 0.0887 on 06
    April 2020. To buy one rand
    you must pay $0.0887 Australian dollars. To find out how much an Australian dollar
    is worth in rand you need to divide R1.00 by the number of Australian dollars you
    INFORMAL FLUCTUATIONS

    Informal fluctuations are the changes in value of one currency in relation to another daily, for example, today US $1.00 might
    exchange at R18.19, but the next day it might exchange at 17.89.
    • When there is a demand for a specific currency the price of the currency will increase. When there is a decrease in the demand
    for a specific currency the price of the currency will decrease.
    • A strong rand implies that it cost less rand to buy a foreign currency.

    A weak rand implies that it cost more rand to buy a foreign currency.

    Major currencies of the world.


    The following table show the major currencies of the world.

    CURRENCY CODE SIMBOL

    British pond or Sterling GBP £


    Japanese yen JPY ¥
    United States dollar USD $
    Australian dollar AUD $
    European Union euro EUR €
    South African rand ZAR R
    Facilities where to exchange Foreign Currencies.

    Foreign Tourists visiting South Africa can exchange their local currencies for rand,
    tourists from South Africa visiting other countries can exchange their local
    currencies for the currencies of their destination country.

    Facilities where currencies can be exchanged:


    o Major commercial Banks
    o Bureaux de Change e.g. Rennies Foreign Exchange or American Express.
    o Foreign Exchange Bureau
    o Travel agencies.
    o Major hotels and cruise ships.
    • Commercial banks and Foreign Exchange Bureau charge a fee for these
    transactions.
    Currency Rate sheet
    • South Africans who are going to travel to another country will go to a bank
    facility to exchange his/her local currency for the currency of the country of
    destination, at BANK SELLING RATE (BSR) - WE SELL.
    • “A Foreign Tourist travelling to South Africa will go to a bank facility to exchange
    his/her local currency for the currency of South Africa, at BANK BUYING RATE
    (BBR) - WE BUY
    CURRENCIY WE BUY WE SELL
    BBR (Value in rand) BSR (Value in rand)

    GBP 22.53 22.72


    JPY 0.17 0.28
    USD 18.19 18.33
    AUD 11.27 11.49
    EUR 19.75 19.94
    Benefits of tourists spending foreign currency.
    • Money spend by inbound international tourists benefit local people through a
    process called the multiplier effect.

    • This is the process by which the foreign exchange or foreign currency, brought
    into the country by foreign tourists, cascades through the economy from one
    group of people to another, in the following way:

    • Inbound international tourists arrive with foreign currency. They spend the
    foreign currency on products and services like transport, local goods and drink,
    entertainment and activities.
    • Inbound international tourists arrive with foreign currency. They spend the
    foreign currency on products and services like transport, local goods and drink,
    entertainment and activities

    • The people who supply these goods and services, such as airline crew, hotel staff,
    restaurant employees and shop assistants, get paid salaries or make a profit by
    providing these goods and services. These are the people who benefit directly.

    • They in turn spend the money on things such as housing, food, transport,
    education and clothing. The people who provide these goods and services also
    get paid or make a profit. These are the people who benefit indirectly.

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