Currency is driving me mad!

I’ve skipped ahead to reading 48. Why do they INSIST on quoting :Yen as "105". That, to me, means "the cost of a Y in is 105", which is clearly rubbish. They never say whether they will use a direct quote or indirect quote as a convention, so I find stuff like: "...the euro strengthened from :E=1 to $:E=0.98." What? If a Euro DID cost $1, but now costs $0.98, surely it has WEAKENED? What am I missing? Anyone else find this needlessly confusing?

i had a similar problem in schweser (p 110, number 9 if anyone cares to confirm) where they quoted 1.2EUR/USD then in their answer used 1.2USD/EUR to calculate. i reported the error but got no response (which i think means that I am wrong) … so yes. i’m also frustrated.

This stuff is always confusing, somehow from L2 I remember CFAI being more clear about it, though. Schweser often screws up.

just to check on this i looked at how they quote this in yahoo finance (the authoritative source, right?) ofcourse they also quote it 1.26EUR/USD (when they mean it’s 1.26 dollars per EUR)… so here’s what’s frustrating. if we saw this quote, most people who are familiar w/ exchange rates would know that it’s 1.26 dollars per EUR in practice. fine. but if we see a question on the test, are we supposed to apply our practical knowledge? now i’m more frustrated.

Glad it’s not just me with this problem. I wouldn’t mind if they said “the market convention is to quote certain rates “backwards”, these rates are…”, because then I could just learn the list of exceptions and move on. But this inconsistency makes some material much harder than it needs to be. I seem to recall that the “cable” £:$ is always quoted backwards, but I could be wrong… Can anyone help with this?

I think I remember seeing the list of exceptions in our level 1 material. Can’t be sure though.

to clarify :Yen as "105" is the new convention in the level 2 books this year and means 1 = 105 Yen.

As far as I can tell, the direct/indirect quote concept, quotation conventions, etc. is Level II material that will not be directly relevant for the Level III exam. I’d suggest just putting the niceties of the quotation conventions out of your mind and focusing on the concepts that make up the Level III curriculum. Obviously a $/yen quote of 105, however expressed (and whether expressed rightly or wrongly) means 105 yen to the dollar and not the other way around.

Sorry if I sound like a smart aleck in my post above, didn’t mean to. I do think though that, notwithstanding any lack of clarity or errors regarding them in the Schweser materials or even the curriculum itself, quotation conventions are unlikely to be meaningful to our success or failure on the Level III exam.

Mandelbrot Wrote: ------------------------------------------------------- > “…the euro > strengthened from :E=1 to :E=0.98.” What? If a > Euro DID cost $1, but now costs $0.98, surely it > has WEAKENED? What am I missing? > > Anyone else find this needlessly confusing? I hate this stuff too, but what you are missing here is that they are not saying a Euro cost $1 and now it costs $0.98. You are adding the dollar signs that they do not have. The context gives a clue to this quoting convention. The Euro would be strengthening if $1 bought 1 Euro before but now buys 0.98 Euros. Plus, this jives with the Yen quote too. It is all annoying but I have a feeling on L3 the CFAI actually throws out all sorts of various quoting conventions to throw us off and make the questions more “real worldy.”

if any of you have schweser, please take a look at #9 in book 5, p 110 and tell me how i’m supposed to know which to use.