VI. According to the text, are the following statements true or false?

1. A Chinese parliamentarian called for his country to diversify its reserves out of “weak” currencies like the euro and another official suggested that the euro's status as a reserve currency was “shaky”.

2. Alarmed that the weak dollar boosts America's competitiveness relative to Europe's, Nicolas Sarkozy told Congress that George Bush's administration needed to do something about the dollar or risk an “economic war”.

3. If foreign investors suddenly abandon America's currency and the

dollar collapses, financial markets couldn’t crash while the plunging currency constrains the Federal Reserve's ability to cut interest rates.

4. The Reserve Bank of Australia raised short-term rates to 15% on November 6th, citing inflationary pressure.

5. Judging by the dollar's slump in the wake of the Chinese officials' comments, investors are fretting that central banks in emerging economies will abandon the ailing greenback.

Vi1. Find the words in the text referring to the following definitions:

1. stretched, firm, tightly drawn

2. a brief fluctuation in stock market prices or increase in trading

3. nervous, tense

4. to increase or augment

5. to leave

6. economic downturn, slowdown

7. feeble, weak

VIII. Fill in the gaps with the words or word-combinations from the list:

a) tumbled e) to deteriorate

b) labour productivity f) industrial output

c) euro area g) in nominal terms

d) benchmark interest rate h) its huge reserves

The dollar 1_____________on the foreign-exchange markets on November 7th on worries that China might invest more of 2_____________—worth $1.4 trillion—in other currencies. The euro climbed above $1.47 and sterling rose above $2.10.

The sharp fall in the dollar caused both gold and oil prices to hit new highs. Gold futures touched their highest level in nearly 28 years on November 7th. The price of a barrel of West Texas Intermediate crude oil reached its highest ever 3______________, above $98.

4________________in America's non-farm businesses grew at an annual rate of 4.9% in the third quarter, the fastest for four years. Unit labour costs fell by 0.2% after rising by 2.2% in the second quarter.

In September 5____________in Britain fell by 0.5%, to be 0.3% lower than a year earlier. It rose by 0.3% in Germany, leaving it 6.1% higher than a year before.

Australia's central bank raised its 6______________from 6.5% to 6.75% because of worries over rising prices. The bank said that inflation was likely to exceed 3% early next year. Indonesia's central bank kept its main interest rate at 8.25%.

The outlook for rich economies is continuing 7____________, according to The Economist's monthly poll of forecasters. The panel has again lowered its predictions for GDP growth in 2008 for several of the 13 countries covered, as well as the 8__________, although it has raised its forecast for Australia.

Listening

listen to the recording and answer the following questions:

1. What effect does a strong dollar have on

a) American holidays in Mexico?

b) European exchange rates?

c) Oil prices?

d) Third World debtor countries?

e) Japanese car exporters?

f) American exporters?

g) Jobs in American industry?

h) The US balance of trade?

2. Why did the dollar become strong?

3. What effect will higher US government borrowings have on interest rates and the value of the dollar?

4. What effect will these interest rates have on foreign investment in the US?

5. What effect will this investment have on the strength of dollar?

6. How can the Bush’s administration stop this process?

7. Why might the Bush’s administration not do this at this time?

Speaking

Speak out:

a) Answer the following questions:

1. How can you account for the dominant role played by commercial banks in the foreign exchange market?

2. What is from your point of view the most effective way of avoiding foreign currency risk exposure?

3. How would you forecast future movements in the exchange rate in this country?

4. What tendencies characterize the present-day state of the foreign exchange market?

b) Comment on the following problem: How do inner and foreign politics of Russia influence the level of exchange rate?

Writing

Your company is in the UK and produces technical merchandise. Export comes mainly to Germany and import - from the USA. Write down a short report about influence of currency rates on the financial situation of the company this year. Compare with former activities. Give general idea on the currency rate influence on the company.

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