Your paper should cover the following:
1. Pick a particular country and its currency, cannot be the U.S. dollar.
Explain the rationale of your choice.
2. Introduce this country’s banking and financial system, for example, its central bank, the head and/or board members of the central bank, the major commercial banks and financial intermediaries, its financial markets, and its recent monetary policy, etc.
3. Collect and demonstrate the daily exchange rates of this currency with other two currencies (one currency must be the U.S. dollar and you are free to choose the other one) from January 1 to April 1
. 4. Calculate the percentage changes of two exchange rates January 1 to April 1 . (Note: the percentage change = ) 5. Explain the major political, financial, and economic events and/or reasons that cause the exchange rate
fluctuations in the three months.
6. Collect (or calculate) the inflation rates in the home country and three foreign countries between January 1 and April 1 .
7. Check if the Purchasing Power Parity Theory holds on these two exchange rates, by using the formula on Page 259. (Note: to check if PPP holds, you need to compare the value of that is calculated by using the formula on Page 259 to the percentage change of exchange rate on Step 4 above. If these two numbers are fairly close, then PPP holds. Otherwise, no.)
8. Forecast the exchange rate changes for the near future and provide reasons and supports
. 9. Identify and explain the potential opportunities and risks for the picked currency in the future