Foreign Exchange What does GDP stand for? Gross Domestic Product – it is a measure of a given country’s national income

Sectors contributing to the GDP  Mining  Agriculture and fisheries  Vehicle manufacturing  Food processing  Clothing and textiles  Telecommunication  Tourism  Transportation  Wholesale and retail trade. Food is needed for the hotel restaurant, farmers are able to sell their The hotel need products to the hotel furniture, bought at and earn money local furniture store and their sales increase Hotel staff are needed to provide a service to tourists. They earn a Someone opens an hotel salary and can support their to accommodate tourists families, better lifestyles Building contractors are needed to build and maintain the hotel, Tourists visit the area they employ and pay staff

Tourists want to buy The Multiplier present for their families effect at home, they buy souvenirs from local communities who earns money and better their lifestyles Tourists may need tourist guides to show them around thus create job Tourists will require other opportunities services like banks, hairdressers, more jobs are created. Strong and weak rand  It is used to describe the value and strength of the SA Rand against other currencies  This is also called the buying power of the currency

The concept of strong and weak rand An increased Value and strengthStrong ofRand one Weak Rand currencies compared to When one unit of our another currency. currency trades for fewer units of another Also known as Hard currency currency Also known as Soft currency Weak Currency

EFFECTS OF A WEAK CURRENCY FACTORS CONTRIBUTING TO A WEAK CURRENCY

More tourist will be able to Higher rates of inflation afford to visit these countries

Increase in manufacturing A weak domestic economy and job creation if demand on exports increase Imports become more Political unrest expensive Cost of living in country Lower interest rates increase Strong Currency EFFECTS OF A STRONG CURRENCY FACTORS CONTRIBUTING TO A STRONG CURRENCY

Imports become cheaper Higher interest rates

Imported products and services Lower rates of inflation become more affordable Fewer foreign tourist A strong domestic economy

Purchasing power strengthens Political and economic stability Interpreting currency rate sheets  A currency rate sheet is a list of the major exchange rates at which a bank buys or sells foreign currency.  Outside banks they have foreign exchange rate display boards  This show the correct rate for that day  You only deal with the currencies we learnt. Interpreting currency rate sheets  The banks receive the exchange rates from the reserve Bank and it is usually only valid for one day.  We see Bank selling (the exchange rate at which the bank sells foreign currency) and Bank buying rates (the exchange rate at which the bank buys foreign currency)

Interpreting currency rate sheets  The rate sheet show you the following:  The name of the country  The currency code  The South African Rand equivalent of 1 unit of the foreign currency.  Foreign currencies  Are displayed by a three letter code  The first two letters refer to the country code  The 3rd to the currency.  Most currencies also have a symbol to indicate the currency. Code Country Currency / Symbol

ZAR South Africa Rand (R)

GBP United Kingdom (UK) Pound Sterling (£) USD United States Dollar ($) EUR European Zone European Euro ( €) AUD Australia Australian Dollar ($) JPY Japan Yen ( ¥) Bank Buying and Bank Selling rates  Bank Buying Rates (BBR)  Bank Selling Rates (BSR) usually higher.  The bank will make money (profit) due to commission, when they sell a currency for more than they paid for it Differentiate between bank selling rate (BSR) and bank buying rate (BBR) Use the exchange rate table

Currency Rand equivalent Pound Sterling (£) 11.55 Dollar ($) 6.11 European Euro ( €) 7.89 Australian Dollar ($) 4.76 Yen ( ¥) 6.20 This table indicate that 1 $ = R6.11

Exchange Rate  Foreign Currency in Rand  = $ 20 x (Exchange rate) 6.11  =R122.20

 Rand in Foreign Currency  = R122.20 / (Exchange Rate) 6.11  = $ 20

What is currency fluctuations?  Changes in currency value in relation to another currency.  It is never the same and changes daily (fluctuation)