jasminasul
Senior Member
Spanish Andalusia
An economist is commenting on a report published by the Bank of International Settlements about off-the-book transactions in the currency derivatives markets.
He's explaining that if an entity needs to do a transaction in dollars but its capital is in euros, it agrees to do a currency swap [permuta de divisas] with somebody who has euros. But if it invests in a country with a lower interest rate, the exchange rate depreciates.
I don't understand why it depreciates so I don't know how to translate the end of the sentence.
If the Italian lira is going to pay you 3%, let's just say over a year, if they're going to pay you 3% over a year more than what you borrow for dollars, the exchange rate is going to depreciate by 3%, meaning the dollar-lira currency rate, and so the net-net is an even deal. You can either be in dollars and earn 3%, or you can be in lira, and earn 6% with a 3% depreciation.
para que el neto ajustado esté equilibrado ?
así pues, el neto ajustado es equitativo ?
He's explaining that if an entity needs to do a transaction in dollars but its capital is in euros, it agrees to do a currency swap [permuta de divisas] with somebody who has euros. But if it invests in a country with a lower interest rate, the exchange rate depreciates.
If the Italian lira is going to pay you 3%, let's just say over a year, if they're going to pay you 3% over a year more than what you borrow for dollars, the exchange rate is going to depreciate by 3%, meaning the dollar-lira currency rate, and so the net-net is an even deal. You can either be in dollars and earn 3%, or you can be in lira, and earn 6% with a 3% depreciation.
para que el neto ajustado esté equilibrado ?
así pues, el neto ajustado es equitativo ?