Doing Business in the Spanish Economy Essay

Doing Business in the Spanish Economy Essay

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The Spanish Peseta had some good times and some bad times compared to the US Dollar and the Japanese Yen during September 2000 until August 2002. Looking at this two year period as a whole, the Spanish Peseta appreciated in value against both the dollar and the yen. This is where the similarities stop though. First off, we'll examine how the peseta fared against the dollar. As I already mentioned, looking at the beginning and ending rates, you can see that the peseta strengthened against the dollar; however, it was hardly a continuous appreciation. From September 2000 until the end of the year the peseta strengthened against the dollar, but the beginning of 2001 marked the beginning of a period of depreciation for the peseta. This depreciation lasted for the first half of the year. Each month during this time, the currency was devalued at about 3.5 pesetas per dollar. The third quarter of 2001 stabilized the peseta once again and started it back on its course of appreciation, which lasted until August of 2002. (Antweiler)

The peseta had a very strong showing against the Yen during this two year period. The peseta started appreciating in value from the very beginning of this period and just kept getting stronger and stronger the entire time. The peseta strengthened against the Yen during every quarter except for the second quarter of 2001. In conclusion, the peseta faired basically the same against both currencies. During the two year period as a whole, the peseta strengthened against both currencies. Also, both currencies had a period in the first part of 2001 where the peseta depreciated against them. The only difference between the currencies is that for the year 2001 the peseta was slightly devalued against t...

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...g the July exchange rate of 167.54 ESP/USD) that is a savings of $820,998.

As you can see it is crucial for companies and consumers to be sure to keep a close eye on exchange rates. Changes in the exchange rate affects all areas of business. A stronger currency makes importers happy, because it costs less for them to bring the goods into the country. Meanwhile, it makes exporters sad, because it costs more for foreign companies to purchase their products, which leads to decreased demand. A currency that is depreciating has the exact opposite affect. Foreign direct investors would like to see a weak currency so that they can purchase capital in their new country at lower prices. Finally, tourists would also like to see a weaker currency, because it allows them to visit a country at less expensive price, because they are able to buy more local currency.

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