The intrinsic currency-valuation framework

Cutting Edge: Foreign exchange

Exchange rates in the spot foreign exchange market quote the value of one currency in terms of another. The intrinsic currency valuation framework, on the other hand, is an attempt to analyse the value of currencies in their own right. The concept of the intrinsic value of a currency is particularly appealing in times of crisis, such as in October 1998, when there was significant yen strengthening. In the intrinsic currency-valuation framework, this would occur when one variable, the intrinsi