Sophomore Year Flashcards
How many foreign currencies comprise the U.S. Dollar Index?
6
Which of the following currencies is not included in the U.S. Dollar Index?
a. the Swiss franc (CHF)
b. the Canadian dollar (CAD)
c. the Australian dollar (AUD)
the Australian dollar (AUD)
How many countries are included in the index?
24
Which currency holds the greatest weight in the U.S. Dollar Index?
a. the yen (JPY)
b. the euro (EUR)
c. the pound (GBP)
the euro (EUR)
How often is the index calculated?
a. (8 hours a day, 5 days a week)
b. (24 hours a day, 7 days a week)
c. (24 hours a day, 5 days a week)
(24 hours a day, 5 days a week)
The USDX measures the dollar’s relative value to a base of __, which was established at the start of the index in 1973.
a. 1.00
b. 100.00
c. 1,000.00
100.00
The trade-weighted U.S. dollar index is…
a. the exact same as the USDX
b. composed of less currencies than the USDX
c. composed of more currencies than the USDX
composed of more currencies than the USDX
Between the USDX and the trade-weighted U.S. dollar index, which probably provides a better reflection of the dollar’s value across the globe?
a. the USDX
b. the trade-weighted U.S. dollar index
c. they are the same
the trade-weighted U.S. dollar index
The USDX is ___ related to EUR/USD.
a. directly
b. inversely
c. not at all
inversely
If the USDX is rising, it is reasonable to expect to see USD/CHF ___.
a. rising as well
b. falling
c. ranging
rising as well
If the USD is the quote currency (XXX/USD), then the USDX and the currency pair should move…
in opposite directions
What theory did the Stephen Jen come up with to explain why the USD strengthens in times of risk aversion and in times of economic growth?
a. The Morgan Stanley Model
b. The Stephen Jen Theory
c. The Dollar Smile Theory
The Dollar Smile Theory
When can you expect the dollar to drop to a new low?
when the U.S. economy struggles with weak fundamentals
What type of relationship usually exists between the U.S. dollar and gold?
a. Inverse
b. Direct
c. No relationship
Inverse
Which country is one of the largest gold producers in the world?
Australia
If the price of gold rises, how does USD/CHF usually react?
Drops
Which among these countries is one of the top oil producers in the world?
a. Canada
b. Philippines
c. Australia
Canada
What is the usual effect of rising oil prices on USD/CAD?
a. USD/CAD rises
b. USD/CAD drops
c. USD/CAD doesn’t move
USD/CAD drops
If demand from the U.S. rises, how does USD/CAD usually react?
a. USD/CAD rises
b. USD/CAD drops
c. USD/CAD doesn’t move
USD/CAD drops
When you lend money to the U.S. government, that means you just bought a..
a. Stock
b. U.S. government bond
c. Yacht
U.S. government bond
What is the other term for the rate of return on a bond?
Bond yield
When bond prices fall, what happens to bond yields?
a. Bond yields rise
b. Bond yields fall
c. Bond yields don’t move
Bond yields rise
When yields of U.S. government bonds rise, what usually happens to EUR/USD?
a. Rises
b. Falls
c. Bond yields don’t move
Drops
True or False. Bond yields serve as an indicator of the country’s interest rate expectations.
True
True or False. The currency with the higher bond yield tends to fall against the currency with the lower bond yield.
False
When investors make carry trades, they are taking advantage of…
Bond spreads
What is the nickname for U.K. bonds?
Gilts
If the fixed income yield in Japan is lower compared to the fixed income yield in Canada, how will CAD/JPY behave?
a. CAD/JPY will drop
b. CAD/JPY will rise
c. CAD/JPY will not move
CAD/JPY will rise
How does a country’s stock market outlook affect its currency?
a. A strong outlook is bullish for its currency
b. A weak outlook is bullish for its currency
c. Stocks don’t affect the currency
A strong outlook is bullish for its currency
As a currency trader, should you still monitor the stock market performance of the major economies?
Yes
True or False. Money flows into the economy whose stock market is performing worse than those of the other economies
False
True or False. Only the industrial companies are included in the DJIA
False
Which is the most traded index in the U.S. stock market?
DJIA
Which among these companies is included in the Nikkei?
a. Toyota
b. Fuji
c. Honda
d. All of the above
All of the above
The principle that the stronger the stock market, the stronger the currency usually holds for most currencies except for…
a. USD and EUR
b. EUR and JPY
c. USD and JPY
USD and JPY
True or False. Stock markets all over the world generally move in the same direction.
True
What global phenomenon changed the correlation between USD/JPY and the Nikkei?
Global financial crisis
Which currency pair is typically used as a barometer for risk?
EUR/JPY
When the global economy is down, how does EUR/JPY usually react?
a. EUR/JPY falls
b. EUR/JPY rises
c. EUR/JPY doesn’t move
EUR/JPY falls
How does rising gold prices tend to affect NZD/USD?
NZD/USD rises
If Nikkei is falling, what’s a good trading strategy for USD/JPY?
a. Long USD/JPY
b. Short USD/JPY
Short USD/JPY
What is the main governing body of the U.S. when it comes to monetary policy?
a. The Fed
b. The SNB
c. The ECB
The Fed
The Fed has two main tools to battle inflation. One is altering the Feds Funds Rate. What is the other one?
Open market operations
Which of the following is NOT an important indicator in the U.S.?
a. Non-Farm Payrolls report
b. University of Michigan Consumer Sentiment index
c. Claimant Count Change
Claimant Count Change
Whenever the dollar is at risk of losing its value due to inflation, what commodity usually rises?
Gold
What does “ECB” stand for?
European Central Bank
Who is the president of the euro zone?
a. Jean-Claude Trichet
b. Angela Merkel
c. Nobody
Nobody
Which currency is called the “anti-dollar”?
Euro
What is the oldest central bank in the world?
The BOE
What do you call the group inside the BOE that is charged of determining interest rates?
a. Federal Open Market Committee (FOMC)
b. Ministry of Finance (MOF)
c. Monetary Policy Committee (MPC)
Monetary Policy Committee (MPC)
Which country has the third largest economy in the world?
Japan
The printing of money to increase the supply of money and stimulate the economy is also called…
Quantitative Easing
Why doesn’t the BOJ want the yen to appreciate too much?
a. It encourages domestic inflation.
b. It causes their stock market to fall.
c. It makes Japan’s exports more expensive.
It makes Japan’s exports more expensive.
What is the inflation target of the Bank of Canada (BOC)?
a. 1% - 3%
b. 2% - 4%
c. 1.5% - 3.5%
1% - 3%
The price of oil is highly correlated with which currency?
Canadian dollar
True or false: Australia’s GDP comes mainly from the manufacturing industry
False
Ensuring growth and maintaining full employment are two of the RBA’s goals. What is the third one?
a. Make sure that the mining industry is growing.
b. Keep the exchange rate stable.
c. Keep the crime rate low.
Keep the exchange rate stable.
Which of the following is the BEST candidate for a carry trade?
a. Canadian dollar
b. Euro
c. Australian dollar
Australian dollar
How many times a year does the RBNZ hold monetary policy meetings?
a. 8
b. 10
c. 12
8
Which country is considered politically neutral?
Switzerland
