Currency Exchange

Full Answer Section

      Exchange Rate Regime The exchange rate regime is the system that a country uses to determine the value of its currency. There are three main types of exchange rate regimes:

• Fixed exchange rate regime: The government sets the value of the currency relative to another currency or to a basket of currencies.
• Floating exchange rate regime: The value of the currency is determined by supply and demand in the foreign exchange market.
• Managed float: The government intervenes in the foreign exchange market to influence the value of the currency, but it does not set a fixed exchange rate.

The Philippines and Brazil both have managed float exchange rate regimes. This means that their governments intervene in the foreign exchange market to influence the value of their currencies, but they do not set fixed exchange rates. Level of Currency Instability The level of currency instability is a measure of how volatile a currency is. A currency with a high level of instability is more likely to fluctuate in value. The Philippines has a medium level of currency instability. This means that the value of the Philippine peso is likely to fluctuate somewhat, but it is not likely to experience large swings in value. Brazil has a high level of currency instability. This means that the value of the Brazilian real is likely to fluctuate significantly. Yearly Average Rate The yearly average rate is the average value of a currency over a one-year period. The Philippine peso has appreciated slightly against the US dollar over the past four years. In 2019, the average exchange rate was 49.79 PHP/USD. In 2022, the average exchange rate was 50.45 PHP/USD. The Brazilian real has depreciated significantly against the US dollar over the past four years. In 2019, the average exchange rate was 4.04 BRL/USD. In 2022, the average exchange rate was 4.83 BRL/USD. Significance of the Information The information in the table is significant because it provides insights into the exchange rate regimes and currency stabilities of the Philippines and Brazil. This information can be useful for businesses and individuals who are making decisions about importing or exporting to or from these countries. Relationship Between Exchange Rate/Stability and Importing and Exporting The exchange rate and currency stability can have a significant impact on importing and exporting. A strong currency makes imports cheaper, but it also makes exports more expensive. A weak currency makes exports cheaper, but it also makes imports more expensive. The Philippines' currency has been relatively stable against the US dollar over the past four years. This has made it easier for businesses in the Philippines to import and export goods. Brazil's currency has been volatile against the US dollar over the past four years. This has made it more difficult for businesses in Brazil to import and export goods. Conclusion The exchange rate regime and currency stability can have a significant impact on importing and exporting. Businesses and individuals who are making decisions about importing or exporting to or from the Philippines and Brazil should carefully consider the exchange rate and currency stability of these countries.  

Sample Solution

   

Currency/Country	Exchange Rate Regime	Level of Currency Instability	Yearly average rate (4 years)
Philippine Peso (PHP)	Managed Float	Medium	49.79 (2019), 49.22 (2020), 50.33 (2021), 50.45 (2022)
Brazilian Real (BRL)	Managed Float	High	4.04 (2019), 5.12 (2020), 5.55 (2021), 4.83 (2022)