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Living Standards in India on a US Dollar Based Salary

Introduction to International Financial System

International financial system refers to the Global Financial System. The Global Financial System refers to those financial institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. The main players in the international financial system are the global Institutions, such as International Monetary Fund (IMF) and World Bank, national agencies, and government departments (e.g., central banks and finance ministries, private institutions acting on the global scale, etc.).

Currency trading is a risky game and you may end up losing a lot of money in the foreign exchange market. Each foreign exchange transaction is unique and comes with its own associated risks, including volatility, exchange rate risk, credit risk, monetary risk, interest rate risk, and the possibility of government intervention in the financial markets. But this does not mean that you cannot make money in the foreign exchange market. To minimize risk, you need to understand how exchange rates are determined, which in turn, will help you to predict exchange rates.

Compile 3/4-pages onthe international currency market investors by responding to the following tasks:

Choose a country other than the U.S. that you will be using for the entire course. Then go to www.oanda.com and find the currency exchange rate (how much of the currency you get for $1). Invest an imaginary $202,995 in this currency and record your position.

What kind of exchange rate system your country has (floating, fixed, pegged etc.).

Now suppose you are to be deployed (sent) to the country you have selected. Your pay (salary) is paid in USD and is fixed for the next two years. Taking as many factors into consideration as you are able to, do you think you will be relatively better or worse off in terms of your spending power in the local currency by the end of your second year?

Based on your analysis and findings, what would you recommend to the international currency market investors? Should the international currency market investors trade your selected country's currency?

•Provide citations to support your argument and references on a separate page.

Solution Preview

India's exchange rate is no longer tied to pound sterling. It has undergone many changes since then and it is no longer following its unique LERMS, but it is now globally linked and it is a fully floating currency. (1)

With the use of the website www.oanda.com if one invested $202, 995.00 into the country of India's currency (the rupee) at the most recent exchange rate, one would have 12, 397, 919.63 in ...

Solution Summary

An expert calculates the current US dollar to Indian Rupee exchange rate, looks at future projections of the rate, considers global and nation based economic factors and makes his recommendation of investing US dollars in Indian Rupees based on the time if rating. This synopsis is research based and carefully analyzed and references used are included.

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