Different Types Of Currency

Currency

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Any form of money that is in public circulation. Currency includes both hard money (coins) and soft money (paper money). Typically currency refers to money that is legally designated as such by the governing body, but in some cultures currency can refer to any object that has a perceived value

and can be exchanged for other objects.

Currency

Current exchange rates

Currency rates last updated Wednesday 24th of March 2010

Euro Official Fixed Conversion Rates

Euro	Exchange Rate	Currency	Currency Description
1 EUR	1.00000	ECU	EUROPEAN CURRENCY UNIT
1 EUR	40.3399	BEF	BELGIAN FRANC
1 EUR	40.3399	LUF	LUXEMBOURG FRANC
1 EUR	1.95583	DEM	DEUTSCHE MARK
1 EUR	6.55957	FRF	FRENCH FRANC
1 EUR	2.20371	NLG	DUTCH GUILDER
1 EUR	13.7603	ATS	AUSTRIAN SHILLING
1 EUR	0.787564	IEP	IRISH PUNT
1 EUR	200.482	PTE	PORTUGUESE ESCUDO
1 EUR	166.386	ESP	SPANISH PESETA
1 EUR	1936.27	ITL	ITALIAN LIRA
1 EUR	5.94573	FIM	FINNISH MARKKA

Why is it important to be aware of the currency of issue? Four reasons:

1. Currency risk

A bond that isn’t denominated in your own currency effectively has unknown future cashflows because you do not know what it is going to be worth in terms of your own currency in the future.

Of course, if you buy a bond denominated in a foreign currency this is a currency play in itself; you wouldn't buy a bond denominated in a currency you thought was going to fall in value against your reference currency.

But just because you think the currency the bond is denominated in is going to either hold its value or rise in value relative to your reference currency, it doesn't mean it is. There is a risk that it won't. There is currency risk.

To take a simple example, imagine buying a Swiss franc denominated eurobond when your reference currency is US dollars. Where the bond's coupon payments and repayment of principal are fixed both the interest earned on the bond and the principal at maturity could be worth less than you expect if the Swiss franc falls in value against the dollar.

2. Country risk

This is the risk that the country where the bond is issued is fundamentally unstable and that this is going to impact on the bond’s issuer to the extent that they cannot meet their obligations – in terms of interest payment and the repayment of principle. To the extent that the rating agencies take account of country risk, an issuer’s credit rating should tell you all you need to know.

3. Taxation

Are you going to be liable for any additional taxes (or any tax breaks) by virtue of holding a non-domestic bond.

4. Regulation

Are you happy about the regulatory environment – or lack of a regulatory environment - the bond was issued in and is governed by.