In: Economics
1- most of the currencies in the world are expressed in USD except a few; that is the USD is expressed in terms of those few.
what are these currencies?
and what is the reason for the exceptions?
2-
in April 2020 oil prices became negative.
what is the meaning of a negative price?
what was the reason for it?
what did the US do to circumvent or treat this?
understant the situation and describe what you understood in your own words.
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1.
Currency pair (USD is euro versus dollar currency pair)
Many currencies are expressed in term if USD. there are two
currency
First currency is called BASE currency (domestic currency)
Second currency is called QUOTE currency (foreign currency).
The currency that not expressed in USD are called EXOTIC
CURRENCY.
EXCOTIC CURRENCY-:excotic currency are currencies that are rarely
used in world financial transaction .
Exotic pairs include one major currency and second a developing
currency.
THESE CURRENCIES ARE:
1) Mexican peso
2) Brazilian real
3)South African rand
4)Chinese Yuan renminbi
5)Norwegian Krone
6)Polish zloty
7)Crech korvn
8)Indian rupee
9)Thai baht
10)Uruguay peso
REASON FOR THE EXCPECTIONS:
1)Less liquidity
2)Higher volatile
3)lack market debt
4)trade at low volume
5) Trading can be expensive
6)Not considered as a major currencies because they are not traded
in foreign exchange market.
2.
NEGATIVE OIL PRICE
price went negative on 20th april 2020 for West Texas intermediate
(WTI).this was happened in the first time that oil price dropped
into negative.
Negative oil price -when the future price of oil contracts falls.it
means in the trading market the future price of oil is always
higher than present price of oil(present price also called spot
price).
REASONS-:
1).Main reason of negative oil price has Coronovirus its caused
unpredictable dropped in demand for petroleum products as there was
majorly lockdwon all over world. People stayed at home no vehicles
are used. Airlines are prohibited.
2).there was a price war between Saudi Arabia and Russia in march
starting that moved to negative oil price.because OPEC and its
allies failed to reach on agreement of price and supply cuts.
Negative oil price effect
1) demand of oil falls sharply.
2). supply exceed the demand
3). storage space running out.
US do circumvent
1).they paid producers to keep oil in the ground and branding it a
strategic reserve.
2).the majority of professional traders and funds that hold these
contract had shift there contract to june
3).Main traget of oil producer was to rebalancing between the
demand and supply.
In month of may the price of oil has steady recovered by around 90%
in may.