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Floating Rates Versus Fixed Rates
Reem Heakal

Did you know that the foreign exchange market (also referred to as FX or forex) is the largest market in the planet? In fact, over $one trillion is traded in the currency markets every day. This article is definitely not a primer for currency trading, but it will help you understand exchange rates and why some fluctuate whereas others do not.

What Is an Exchange Rate?
An exchange rate is the rate at that one currency can be exchanged for an additional. In other words, it is the price of another country's currency compared to that of your own. If you're traveling to a different country, you would like to "obtain" the local currency. Simply like the price of any asset, the exchange rate is the worth at that you'll be able to obtain that currency. If you're traveling to Egypt, as an example, and therefore the exchange rate for USD 1.00 is EGP 5.fifty, this implies that for each U.S. dollar, you can buy five and a [*fr1] Egyptian pounds. Theoretically, identical assets should sell at the identical worth in several countries, as a result of the exchange rate must maintain the inherent price of 1 currency against the opposite.

Mounted
There are 2 ways in which the value of a currency can be determined against another. A mounted, or pegged, rate could be a rate the govt (central bank) sets and maintains because the official exchange rate. A set worth will be determined against a major world currency (usually the U.S. dollar, but additionally other major currencies like the euro, the yen, or a basket of currencies). In order to maintain the local exchange rate, the central bank buys and sells its own currency on the foreign exchange market in return for the currency to which it is pegged.

If, for instance, it is determined that the value of a single unit of local currency is equal to USD three.0zero, the central bank can have to make sure that it can offer the market with those bucks. In order to keep up the rate, the central bank should keep a high level of foreign reserves. This could be a reserved quantity of foreign currency held by the central bank that it can use to unleash (or absorb) additional funds into (or out of) the market. This ensures an appropriate money supply, applicable fluctuations within the market (inflation/deflation), and ultimately, the exchange rate. The central bank can additionally regulate the official exchange rate when necessary.

Floating
Unlike the fastened rate, a floating exchange rate is set by the non-public market through provide and demand. A floating rate is typically termed "self-correcting", as any differences in provide and demand will automatically be corrected in the market. Take a look at this simplified model: if demand for a currency is low, its worth will decrease, thus creating imported product a lot of expensive and therefore stimulating demand for local goods and services. This in turn can generate additional jobs, and hence an auto-correction would occur in the market. A floating exchange rate is constantly changing.

In reality, no currency is wholly fastened or floating. In a fixed regime, market pressures will conjointly influence changes within the exchange rate. Typically, when a local currency does mirror its true worth against its pegged currency, a "black market" which is more reflective of actual offer and demand could develop. A central bank will often then be forced to revalue or devalue the official rate so that the speed is per the unofficial one, thereby halting the activity of the black market.

In a very floating regime, the central bank could additionally intervene when it is necessary to ensure stability and to avoid inflation; but, it is less usually that the central bank of a floating regime will interfere.

The planet Once Pegged
Between 1870 and 1914, there was a global mounted exchange rate. Currencies were linked to gold, which means that the price of a native currency was fastened at a group exchange rate to gold ounces. This was known as the gold customary. This allowed for unrestricted capital mobility plus world stability in currencies and trade; but, with the start of World War I, the gold standard was abandoned.

At the tip of World War II, the conference at Bretton Woods, in a shot to get global economic stability and increased volumes of world trade, established the essential rules and regulations governing international exchange. As such, a world monetary system, embodied within the International Monetary Fund (IMF), was established to push foreign trade and to take care of the monetary stability of nations and therefore that of the world economy

It had been agreed that currencies would once again be mounted, or pegged, but now to the U.S. dollar, which in flip was pegged to gold at USD thirty five/ounce. What this meant was that the price of a currency was directly linked with the worth of the U.S. greenback. So if you needed to shop for Japanese yen, the value of the yen would be expressed in U.S. bucks, whose value in turn was firm within the value of gold. If a country required to readjust the value of its currency, it may approach the IMF to regulate the pegged worth of its currency. The peg was maintained till 1971, when the U.S. dollar could now not hold the price of the pegged rate of USD thirty five/ounce of gold.

From then on, major governments adopted a floating system, and all makes an attempt to move back to a world peg were eventually abandoned in 1985. Since then, no major economies have gone back to a peg, and the use of gold as a peg has been utterly abandoned.

Why Peg?
The reasons to peg a currency are linked to stability. Especially in nowadays's developing nations, a country might decide to peg its currency to create a stable atmosphere for foreign investment. With a peg the investor can invariably know what his/her investment worth is, and therefore can not have to worry regarding daily fluctuations. A pegged currency will also facilitate to lower inflation rates and generate demand, which results from bigger confidence in the soundness of the currency.

Fastened regimes, but, can usually cause severe money crises since a peg is troublesome to maintain in the future. This was seen in the Mexican (1995), Asian and Russian (1997) money crises: an try to maintain a high worth of the native currency to the peg resulted in the currencies eventually turning into overvalued. This meant that the governments might no longer meet the strain to convert the local currency into the foreign currency at the pegged rate. With speculation and panic, investors scrambled to urge out their money and convert it into foreign currency before the local currency was devalued against the peg; foreign reserve provides eventually became depleted. In Mexico's case, the government was forced to devalue the peso by thirty%. In Thailand, the govt eventually had to permit the currency to float, and by the top of 1997, the bhat had lost its value by fifty% because the market's demand and supply readjusted the price of the local currency.

Countries with pegs are usually related to having unsophisticated capital markets and weak regulating institutions. The peg is thus there to assist create stability in such an setting. It takes a stronger system in addition to a mature market to maintain a float. When a rustic is forced to devalue its currency, it's also needed to proceed with some type of economic reform, like implementing larger transparency, in an effort to strengthen its money institutions.

Some governments could select to own a "floating," or "crawling" peg, whereby the govt reassesses the price of the peg periodically and then changes the peg rate accordingly. Usually the amendment is devaluation, however one that is controlled thus that market panic is avoided. This methodology is typically used in the transition from a peg to a floating regime, and it permits the government to "save face" by not being forced to devalue in an uncontrollable crisis.

Although the peg has worked in creating international trade and monetary stability, it had been used solely at a time when all the main economies were a half of it. And while a floating regime is not while not its flaws, it's proven to be a additional efficient means that of determining the long term worth of a currency and making equilibrium in the international market.


Article Courtesy:
http://finance.yahoo.
com/education/
currencies/article/
106076/Basic_
concepts_for_
currencies_markets


Currency News

 Forex Rate - Currency News
Forex news and articles about spot Gold prices and oil

Euro Weakness Looking To Hold
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21 May 2012 at 12:33pm
On the Forex markets this morning the Euro around was struggling to regain a foothold beyond the $1.27 area against the Dollar. Staying virtually unchanged from its level on Friday, the dollar at 1.2692 euro (+ 0,08%). A low of 1.2642 dollars was hit this morning, against a peak at 1.2708. No significant movements to report against the ye Read more ...
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1 May 2012 at 4:41am
Yesterday the euro was down slightly compared to the U.S. dollar, 1.321 to 1.325 dollars compared to last Friday, particularly affected by the disturbing news growing on Spain. The Spanish economy has again contracted by 0.3% in real terms in the first quarter 2012 compared to the last of 2011, according to the National Statistics Institu Read more ...
Euro Stability Still A Concern On Forex Markets
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Euro Mixed Against All Other Majors
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18 Apr 2012 at 7:53am
The single currency was losing again today, dropping below $1.31 (EUR/USD) on Wednesday afternoon, amid persistent doubts about the sovereign status of Europe. At this time, the euro yield is 0.42% against the greenback at 1.3073 dollars per euro. The IMF reviewed yesterday, downgrading its growth forecast for Spain in 2012, which shows a Read more ...
Fed Keeps Rates Low ? Euro Seems Without Trend
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14 Mar 2012 at 6:40am
The single European currency remained without a major trend against the U.S. dollar in the wake of a highly anticipated meeting of the Monetary Policy Committee of the Fed, whose tone lately has been quite positive for the Dollar. The Euro dropped yesterday afternoon from 0.04% to 0 Read more ...
Bernanke comments causes sell off
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1 Mar 2012 at 4:55am
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Today the euro remains firm versus the dollar and sterling, trading in relatively tight ranges despite the announcement from ratings agency Standard & Poor?s that it is cutting Greece?s long term credit trading to selective default. Such a move was already expected and indeed factored in, though yesterday?s comments from EU Commission Read more ...
Euro upside following Greek deal
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22 Feb 2012 at 9:34am
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Euro upside following Greek Deal
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21 Feb 2012 at 9:20am
The euro gained some ground in early morning trade briefly breaking through key resistance after eurozone finance ministers finally sealed the details of a second ?130 billion bailout package for Greece. There was also agreement on the details of Greek?s deal with private sector investors, who are now expected to take a haircut in excess of Read more ...
Euro sold as Greek Deal lingers
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16 Feb 2012 at 4:35am
The euro started yesterday with a firmer tone on the news that China would continue investing in euro debt and pledges from the Greek opposition Conservative Party to commit to tough austerity measures. This was before the latest twist in the on-going Greek debt saga saw renewed pressure on the single currency, which has fallen back to trade at Read more ...



Convert Currency Round Rock

Progressive Rock, Part 2

Epilogue

Excerpt from the author's book on Progressive RockThe Strawberry Bricks Guide To Progressive Rockby Charles Snider364 pagesISBN 978-0-6151-7566-9Published by Lulu.com

In London, during a particularly hot summer in 1976, "punk" signaled a change of the guard. Although short lived as a genuine movement, it eventually led to a wholesale reappraisal of what rock meant with far reaching repercussions, especially with regards to progressive rock. And based on the class of 1977 (Buzzcocks, Public Image Ltd, Wire, et al.), this was an overdue breath of fresh air. The progressive ethos was now anathematic, representing what best not to do with rock music. But while certainly aping "stardom", the punk aesthetic relished in the fact that it didn't play instruments (well); technical ability meant next to nothing and almost instantly rock music launched off on a different trajectory. But calling the Sex Pistols and their like the triggermen, however, is a vast overstatement. More than anything, punk slammed the door on the hippie era, once and for all.

I. End of an Ear

There are of course, more practical reasons for the change. Foremost, the next generation had arrived. Just as the screaming girls of Beatlemania grew up, both progressive musician and fan had aged. Accordingly, sales of progressive records had hit a plateau. Look at the change in output in the waning years of the timeline: bands went "commercial" out of necessity, often in a last-ditch effort to reach new fans and/or pay off record label debt. The music industry had also changed significantly from the start of the timeline, and the sheer volume of albums being released created a much more competitive environment for a record label's resources; they were less willing to wait for a band to succeed, let alone finance someone's stadiumsized ego. Those that didn't perform were promptly dropped by their labels, eager to cash in on a group more in tune with the new zeitgeist. After all, where could you go after you fill an album side with the same song?

By the end of the 70s, the technology involved in creating music had also evolved. The chirp of the drum machine and the analog sequencer (precursor to the MIDI standard) were now standard in studios that could record twenty-four, even forty-eight tracks at once. Polyphonic keyboards - with the ability to play more than one note at a time - negated the use for both fast hands and banks of keyboards. The FM synthesis of digital synthesizers and the Fairlight CMI (one of the first "samplers") cracked the sonic palette wide open. Creating new sounds was much closer to the push of a button away, and there's little doubt of the influence this had on the "new wave". All told, these technologies had a profound effect on the progressive: virtuosity became redundant and the old ethos was now pass.

Although the commercial repercussions of the new aesthetic would take years to reflect the change, the gigantic proportions of progressive rock were no longer the credentials to carry. In fact, most progressive bands had ceased trading by the timeline's end, and of those still in business, many were indeed well past their sell-by date. For those few who still persevered, they read the writing on the wall: every progressive band that lasted through the 1970s and on into the 1980s did so by taking their music in a different direction. The cycle that started with R&B covers, spent its adolescence with psychedelia and matured into progressive rock, now sought refuge in pop. However, it's no secret: progressive rock was no fashion victim; it simply ran its course, just as every other musical genre that ever existed.

II. Leg End

In the wake of the new wave, most rock historians argue that progressive rock has not aged well. (In fact, Rolling Stone went as far as to lower the ratings of almost every prog rock album between the "red" and "blue" editions of their "Record Guides"). The critics assert that it was unnecessarily complex and exigent; that there was little reason to stretch rock over any album's side or play in anything but 4/4 time. Others say it sounds terminally dated - but can't that be applied to almost any form of music? And so it goes: the conundrum of progressive rock's validity is one of rock music's enduring enigmas. Yes, it may have forgotten what rock-n-roll was all about. Yes, there is little doubt that a large degree of virtuosity was wasted in what could only be described as "athleticism". And most certainly, it was consciously highbrow. So it is true that progressive rock was the end of a genetic line that no one - not even themselves - followed. Thus, the dinosaur was born.


Yet, of the major prog rock bands that endured the 70s, almost every one enjoyed greater commercial success in the 80s. Yes ditched Topographic Oceans for Lonely Hearts. Result? A US No. 1 single. The more members Genesis shed, the more records they sold. Supergroups like Asia and GTR forsook their constituents' past to reach massive commercial heights. All told Genesis, King Crimson, the Moody Blues, Pink Floyd, Rush, Vangelis and Yes all sold more records in their second decade than their first. Many from the era prospered as solo artists as well: Steve Winwood, Peter Gabriel, and Phil Collins were among the most commercially successful popular music artists of the 1980s. The genre also spawned some great producers: both Steve Hillage and Mike Howlett from Gong and Ray Shulman from Gentle Giant produced some ground-breaking new wave records in the 1980s. But what's the caveat? None achieved the next level of success doing anything even remotely prog rock, and almost none of them survived commercially into the 90s. Sure, neo-progressive bands such as IQ, Marillion, Pallas or Pendragon arose during the 1980s to some degree of success. More recently, another new generation of derivatives, such as Dream Theatre, the Flower Kings, Porcupine Tree, and Spock's Beard have picked up the torch. But beyond being cult favorites to the progressive cognoscenti, none ever achieved any mainstream commercial success. The new age of Windham Hill, Private Music or Pulse Records also had its roots in the progressive era, but owed much of its success to deft marketing, as did the "muso" flashiness of smooth jazz.

As the 80s closed, the last vestiges of progressive music were to be found in the virtuosity of heavy metal and pomposity of gothic rock. The 90s however saw a different story. Beginning with a renewed interest in psychedelia generated from British "shoe-gazers" such as My Bloody Valentine and Ride, the outlook for progressive rock took a turn for the better. In America, "hippie" came back in, ushered by the flannel of grunge and the extemporary "jam" bands. Krautrock in particular saw its currency rise exponentially with the advent of the post-rave electronica, though neither ever attained mainstream appeal. But groups as diverse as Glasgow's Long Fin Killie, Chicago's Tortoise, Iceland's Sigur Rs, Swedish death-metal kings Opeth, and the multinational The Tangent have taken prog rock's influence and forged it into something new of their own. Indeed, progressive rock has enjoyed resurgence in the new millennium. Most auspiciously, many artists and fans alike are opening up and revealing their love for most things 70s, including those progressive. Maybe we forgot what we didn't like about it? Maybe what's being passed off as rock today really is that bad?

Let's not forget: the artists of the progressive era were well loved in their heyday. The music was not the outr fringe or some obscurity. The majority of the albums documented in the timeline were released with commercial intent; charting in both the US and the UK, they sold tens of thousands of copies, while some even earned gold and platinum record awards. Most bands had records that were worthy of both radio play and album reviews in the mainstream media of the day. Admittedly the world was a smaller place, but this was the 1970s, and this was its music. The progressive era was much more than a neolith; it was the evolution of rock-n-roll, and its legacy is the generation of men that formed its ranks and the venerable discography they left in their wake.

III. Redux Nostalgia, Reissues and Reunions

It's now over fifty years since the first decade of rock-n-roll. That's a long time in anyone's book. Who, at the onset of the timeline, even thought they'd be making music a decade later, let alone another quarter of a century later? It speaks volumes of the era that Richard Pinhas or Peter Hammill is still releasing - quite credible by the way - albums to this day. But there's a big difference between a twenty-year old bachelor and an adult of thirty with a family ...or sixty with grandkids! Nostalgia has risen more than an eyebrow in the past. Why do most people stick with the music that hit them in their youth? Certainly the age-denial and extra cash of the baby boomer generation adds some validity to the theory. But are we all - as the song goes - "living in the past"?

To repeat again, much of this music may have been long forgotten if not for the arrival of the compact disc. True, the cachet of the vinyl record has increased the cool factor of progressive rock albums and one only needs to peruse eBay listings to get an idea of what some of the original pressings command today. In fact, the quest for uncovering every last progressive obscurity has turned the "archeology" of record collecting into complete obsession for the diehard. Yet armed with newfound fidelity, the "remastered CD" has expanded the vinyl legacy with not only the ultimate enticement of "bonus tracks", but some damn good booklets as well. And each subsequent reissue feeds the used bins with another pile of goods for the next generation to sample. Even the lesser known groups remain cult favorites to this day, as the aftermarket for CD reissues still burns strongly.

As a result, many if not all of the bands in the timeline have picked up their instruments over the ensuing years for another go at it. Whether in support of an album reissue, another attempt to stoke the retirement fund, or a tour prompted by "if not now then never", the validity of these reunions is the subject of heated debate. Precious few have created music that has eclipsed their original output, and much more than just "old school", the prospect of old men reliving their youth threatens to compromise their venerable legacies. But for each reformation, there has been a loyal following for the "Still Crazy" (one of my favorite movies) antics. Finally, the advent of the tribute band gives rise to the notion that the music can exist corpus delicti. But even if progressive rock remains "music of the 70s", does that mean one may not enjoy the music outside of the decade in which it was created? Three events at the author's time of writing put this legacy in perspective:

Billed as the "Gong UnConventional Gathering", the legendary Melkweg in Amsterdam was invaded by teapots, pothead pixies and the greater Gong family of musicians and friends in November 2006 for three nights of concerts and fun. Although the band had taken annual touring jaunts since their reunion in the mid-90s, Gong - like numerous others - could no longer afford to tour as a loss-leader for record sales; their last tour was in support of 2000's Zero to Infinity. So rather than putting the show on the road, the faithful took the pilgrimage to Amsterdam. In and of itself, this was nothing new; for both fan and artist, festivals had been the mainstay for progressive music since the first Progfest appeared in Los Angeles in 1994. But gathering nearly every member, side-project and offshoot under the Gong umbrella that still remained in service, Daevid Allen, the Hadouk Trio, Mother Gong, Here & Now, Acid Mothers Gong, Zorch, Sacred Geometry, Eat Static, System 7, House of Thandoy, University of Errors, Kangaroo Moon, Tim Blake's Crystal Machine, the Steve Hillage Band, and many other permutations all took the stage (only Gongzilla was curiously absent). The climax of the weekend was of course the reunion of the classic trilogy era band: Daevid Allen, Gilli Smyth, Didier Malherbe, Mike Howlett, Tim Blake, and Steve Hillage, along with Chris Taylor and Theo Travis. Only Pierre Moerlen was absent; he passed away in 2005. And whatever verit the eventual DVD or CD releases will reveal, for those that were there (this author included), the reunion was both a genuine and exciting event.

After rumors that the classic five-piece band of the early 70s were squashed by Peter Gabriel's inability to commit, Genesis - Phil Collins, Tony Banks, and Mike Rutherford, aided by the ever-loyal Chester Thompson and Darryl Stuermer - held private rehearsals to gauge the viability of bringing the old group out of mothballs. They announced a "series of shows" to be held throughout Europe and America in the summer and fall of 2007. Behind the scenes, their longtime engineer Nick Davis had prepared new stereo and 5.1 surround mixes of the band's entire catalog. Lavishly packaged, each album also contained an accompanying DVD with archival video footage, music videos and new interviews with the band. A slick website for the band - subscription-based of course - was launched, offering ticket pre-sales to the hotly-anticipated shows along with the prerequisite content of an official band website, including contests, member-only media and merchandise; even the ability to purchase CDs of each and every concert on the entire tour! While there is little doubt that productions of this magnitude will be few and far between in the future, fans of the "progressive" era have been mildly disappointed to find that with the exception of a couple medleys, the band is offering only a few songs from their 70s catalog, opting instead for their big 80s hits such as "Invisible Touch", "Land Of Confusion" and "Throwing It All Away".

On the other hand, German progressive group Hoelderlin contrasts this with a sort of "resurrection". With (presumably) the other past members' blessings, the core of longtime drummer Michael Bruchmann and bassist Hans Br joined up with keyboardist Andreas Hirschmann, guitarist Dirk Schilling and most curiously vocalist Ann-Yi Etvs. After an initial kickoff gig in their native Wuppertal, the band, with three new members of a more current generation, first appeared in 2005 on a WDR television broadcast. The entire back-catalog was then (thankfully) reissued by EMI and undoubtedly the DVDs will eventually appear. But released in early 2007, an album of all new material, simply titled Eight, offers something much different than nostalgia - a complete reinvention of the band. Leveraging their classic 70s approach to progressive rock, the band has combined modern production techniques into a sound that is both fresh and exciting, while remaining completely sympathetic to their venerable legacy. Although lineup instability appears inevitable, I can only hope to hear much more from them.

Over its now numerous decades, rock-n-roll has consistently learned from its past, killed its idols and fueled the next generation with another dose of "teen spirit". But the further we get from rock-n-roll's beginnings in the 1950s, the more important it becomes to know the history of rock-n-roll. There's a certain amount of math to music, and the finite combinations of the twelve pitches of the chromatic scale - especially those of the three chord variety - has rapidly closed the gap on originality, let alone cheap imitation.

Just as it forever changed the way music was listened to at the beginning of the 20th century, technology also seems poised to take it away from us as we enter the 21st. Whether it's the internet, cell phones, texting, video games, DVDs, or some other information-induced proclivity, finding the time to listen to music is the record industry's ultimate challenge. For this author, nothing epitomizes this more than the mp3 player: while novel as a storage device, it's loathsome as a listening device. The portability that lossy data compression offers has rendered fidelity - the inherent quality of what we hear - secondary; as the mature music industry serves up the lowest common denominator, psycho-acoustic algorithms are now positioned as marketing tools in the so-called "loudness race". Moreover, that an iPod is a fashion accessory is still ancillary to its biggest crime: it has made music an accessory to our everyday lives. No longer is listening to music a primary activity; it now accompanies everything we do. The era of progressive rock had none of this; it was a time when music came first, and a time when we made time for music.

Musical taste aside, progressive rock remains neither any more nor any less important than any other type of music in rock's history. And yes, the musical virtuosity and complexity at its very core never made it "better"; it simply set it apart. Progressive rock is another chapter of the story, yet one that may indeed be one of the most original and rewarding to the listener. I'll close with a request: pick up a record, drop the needle and listen up. Every note of this history is yours to enjoy.

[[ct]]: Convert Currency Round Rock

Real, The Brazilian Currency - The Brazil Series: Day 14 (27/12/2010)

28 Dec 2010 at 7:59am



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