Global Money Markets and Institutions
Finance 390:375:01 & 02
Fall Semester 2013
This course provides an overview of the foreign exchange market, investing in financial
and real assets across national borders, and managing the extra dimension of risk that
results from investing in foreign currencies. I will strive in every class to provide some
current context to what we are studying.
We will study the development of the current global “financial architecture.” For decades
following World War II the US dollar served as the foundation for the global financial
system. Then on January 1, 1999 the euro made its debut. A significant amount of world
trade is now denominated in euros, and so, the euro increased in global importance at the
expense of the dollar. But, now that the Eurozone is dealing with a sovereign debt crisis,
there is a strong demand for dollar-denominated assets.
We will study how different countries manage the external values of their currencies. Some
governments tie their currencies to a major currency, such as the USD, the yen, or the euro.
Other countries let their currencies float. China fixed the renminbi to the dollar since the
early 1990s, before letting it gradually appreciate versus the dollar from 2005 through mid
2008. In June 2010 China announced that the RMB would be allowed to appreciate again.
The appreciation versus the dollar continued over the second half of 2011. The Hong Kong
Monetary Authority fixes the exchange rate between the HK dollar and the US dollar
through an arrangement called a currency board. Essentially, Hong Kong conducts its
