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foreign exchange markets have analyzed the period January 1st- April 2, 2004 for the U.S. dollar- Singapore dollar exchange rate. During this period of time, the exchange rate has decreased from 1.70190 on the 1st of January to 1.67210 on the 2nd of April, with a high of 1.71860 and a low of 1.66690. This means that the Singapore dollar has been strengthening against the U.S. dollar, gaining 0.0298 during this period, that is around 1.75%. The rate is subsequent to the general weakening characteristic of the U.S. dollar on the international financial markets.
The fact that the Singapore dollar has been strengthening has several consequences. For one, the exports from Singapore to the United States are somewhat discouraged. This is a direct consequence of the fact that one will gain less from an export to the United States. AS we know, an export is paid in the currency of…
However, using a portfolio balanced channel, agents of the government balance their portfolios among domestic money and bonds as well as foreign currency and bonds. When economic conditions change, the portfolio is adjusted to a new equilibrium which in turn, influences the exchange rate. Agents can also view futures on exchange rates by looking at how certain countries are intervening in monetary policy. This method requires the reading of signals, because the change of expectations rate will also affect the current market rate (Muss, 1981).
Finally, although there are many ways to influence foreign exchange markets, governments can use their foreign exchange currency reserves to prop up a currency that is falling. For example, if the British Pound is falling, a government could sell U.S. Dollars and put them in Pounds, thus increasing the value of the Bound. Governments can also borrow from other countries to purchase pounds, or to…
Graham, a. (2000). Foreign Exchange Markets. London: Fitzroy Dearborn.
Levinson, M. (2006). The Economist Guide to Financial Markets. London: Profile Books. Retrieved from: https://docs.google.com/file/d/0B_Qxj5U7eaJTZTJkO DYzN2ItZjE3Yy00Y2M0LTk2ZmUtZGU0NzA3NGI4Y2Y5/edit?pli=1&hl=en
Muss, M. (1981). The Role of Official Intervention. Fairfax, VA: George Mason University Press.
Pettinger, T. (2007). Government Intervention in the Foreign Exchange Market. Economics Help. Retrieved from: http://www.economicshelp.org / macroeconomics/exchangerate/government-intervention.html
In fact, modernly, most banks no longer attempt intervention in the marketplace at all. It can be argued, however that there is some value to remaining aware of currency exchanges. For example, determining some for of hedging for long-term purchase contracts can help businesses avoid season-related losses (Mizen, 2003). On the same note, however, it is just as simple for a business to require payment of the agreed upon amount on the actual day of exchange, not in advance. This allows complete avoidance of any market shifts as that current day's market price will set the total. At this point, it becomes apparent that the only reason for intervening or exchanging funds early would be to make a profit in excess of the agreed upon purchase price. hile useful and a creative technique, the market is unpredictable and such measures can prove very risky.
As can be seen there is…
Giddy, Ian & Dufey, Gunter (2003). The Handbook of International Accounting. United States: Wiley Publications.
Mizen, Paul (2003). Monetary History, Exchange Rates and Financial Markets. Massachusetts: Edward Elgar Publishing.
Taylor, Mark & Sarno, Lucio (2001). Official Intervention in the Foreign Exchange Market: Is it Effective, and, if so, How Does it Work? CEPR Discussion Paper, 2690.
Foreign Exchange Market of China
The foreign exchange market is a financial market for trading currencies. The market is decentralized and there are financial centers around the world that operate as places of trade, where different types of buyers and sellers can trade the currencies. Ultimately, these trades directly influence how each currency is valued relative to the world market. The foreign exchange market involves international trade and investment which in turn enables the currency conversion. The foreign exchange market is the factor that allows for trade to happen between countries that do not have the same currency, like China and the United States. When the currency is being traded, it ultimately determines the value of the dollar and of the yuan.
The spot exchange rate is the exchange rate where differing parties "agree to trade two currencies at the present moment" with the value of the currency "usually at…
Begg, D. (1997, May 8). Europe's single currency: The best way to fit it together. The Economist, Retrieved from http://www.economist.com/node/149135
Farlex. (2011). Spot exchange rate . Retrieved from http://financial dictionary.thefreedictionary.com/Spot Exchange Rate
InvestorWords. (2011). Forward exchange rate. Retrieved from http://www.investorwords.com/2065/forward_exchange_rate.html
Kanamori, T., & Zhao, Z. (2006). Existing theories of exchange rate determination. Retrieved from http://www.adbi.org/book/2006/05/16/1819.renminbi.exchange.rate/existing.theories.of.exchange.rate.determination/
Globalization is juxtaposed with this; nations are integrated on the level of economic prosperity. Nevertheless, Mills points out that many Christian principles prevail in the globalization paradigm: fair trade, the accountability of the government, the interdependence of nations and the upliftment of the poor are some of the issues mentioned in this regard.
According to the author, globalization is therefore a phenomenon that can be very beneficial from a Christian perspective. It is however important that the correct actions are taken and specific principles upheld.
When I first realized that Mills' article was going to address the Christian perspective of globalization, I must admit that I experienced a sinking feeling in the vicinity of my rib cage. I also admit to thinking something like, oh no, one of those. I expected the article to beat the whole globalization to a pulp, because it is reminiscent of the Tower of Babel…
Forward, Futures and Options Foreign Currency Markets
eview of Foreign Exchange Markets
Assessment of Foreign exchange Markets
Forward, Futures and Options Foreign Currency Markets
Forward currency market entails an agreement for sale or purchase of foreign currency at a set price and at a particular date. In this agreement, final cash settlements are undertaken only on the set date where the contracting parties realize their gain or loss. Forward currency contract is a private agreement that is not undertaken over -- the counter making the contract more flexible and less standardized compared to futures contract (Eiteman, Stonehill, & Moffett, 2001).
Futures contract is a standardized agreement trades on exchanges or in over-the-counter markets. The agreement is between the seller and the buyer where the seller is referred to as the one taking a short position and the seller is referred to as the one taking the long positing. For the…
Copeland, L.S. (2008). Exchange Rates and International Finance. United Kingdom: Pearson Education.
Eiteman, D., Stonehill, A., & Moffett, M. (2001). Multinational Business Finance. Boston: Addison-Wesley Publishing Company, Inc.
Hull, J.C. (2006). Fundamentals of Futures and Options Markets. Upper Saddle River, New Jersey: Prentice Hall.
One of the more popular analytical methods that is used with MT4 that is used to coordinate share trades is based on the Fibonnaci series (each number in this series except one is the product of the preceding two numbers; i.e., 1, 2, 3, 5, 8, 13 & #8230;). This Fibonacci series is used in quantitative trading systems such as MT4 to help traders modify their investments in real-time as the market changes as described further below.
The Fibonacci series can be found throughout nature in the way a pinecone grows when viewed from above or the patterns in a seashell such as the nautilus. Humans have a natural affinity for the Fibonacci series which is also known as the "Golden atio" because it provides an aesthetic that is pleasing to humans (Gelet, 2009). Also pleasing to humans is the power of the Fibonacci series to help manage…
Artis, M. & Weber, A. (2000). The Euro: A challenge and opportunity for financial markets.
About Us. (2010). PIPPoint Forex Brokerage. Retrieved from http://pippoint.net/index.php?option=com_content&view=frontpage&Itemid=75.
Salcedo, Y. (2004, April). Forex FCM report. Futures, 33(5), 33-34.
In addition, a series of joint ventures in which West German steel firms joined with East German firms and Krupp, Klockner, and Thyssen of Germany was pursuing other developmental initiatives in eastern Europe as well. Likewise, Arbed of Luxemburg was involved in steelmaking facilities in the former East Germany. According to Mangum et al., "The rising market for improved galvanizing for automobiles, appliances, canning, and other uses is producing a rash of joint ventures throughout the world. Some of these are internal to various countries and others involve international partners" (p. 74).
As a result, nearly 30% of the world's steel supply is now produced by plants belonging to companies that did not exist just 3 decades ago (Ahlberg, Pitkanen & Storsch 1999). As these authors point out, "Such upstarts have entered a global market that since 1980 has grown by less than 1% a year -- an average combining…
Ahlberg, J., A. Pitkanen and L.L. Schorsch. 1999. "Forging a New Era for Steel." The McKinsey
Altunisik, M.B. And O. Tur. 2004. Turkey: Challenges of Continuity and Change. New York:
There are price differences between the U.S. And UK sites for Toys 'r' Us. One example is the animated Talking Ben stuffed bear, which sells for $9.99 in the U.S. And £21.99 in the UK. The equivalent U.S. price in the UK should be £6.56, so there is a substantial price difference on this product.
Consumers do not, however, have the right to demand equal prices. Each nation represents its own market, so the economic conditions for each nation will be distinct. There are significant differences in the costs that underlie each product on retail shelves that are reflected in the retail price. Thus, the conditions for each market are different and the result will be different prices. Goods can flow across borders, but that does not imply that there is a global market -- each local market has its own conditions.
Furthermore, retail prices for consumer goods…
he currency in South Africa is the rand. he rand is a free floating currency meaning that there are few controls on the value of the currency. While the rand is a reference currency in the southern Africa region, it is not considered to be a "hard" currency. he performance of the rand against the USD in the past year is as follows:
he chart shows the downward trajectory of the rand against the dollar. A year ago, the rand traded at 7.73 to the dollar, and today it is 9.12, a decline of 18%. his bodes well for a manufacturing operation in South Africa, where the already-low labor costs would be decreasing over time. It does not bode well for selling in South Africa, however, as the country's currency continues to get weaker, which means profits from South Africa will be worth less in dollar…
The Chinese yuan is not a floating currency. Its exchange rate is managed heavily by the Chinese government and as a result trades within a band set by the Chinese government, on a soft peg to the U.S. dollar. China's currency manipulation may perpetuate the band, but the country is under severe inflationary pressure. This puts the yuan on a steady, long-run appreciation, which can be seen in its chart for the past year:
The yuan one year ago traded at 6.29 to the dollar and today it trades at 6.23. This represents an appreciation of 0.9%. The country face high inflation for much of the year, but that inflation is reported to have dropped to 2.1% in March 2013. This inflation rate is not much different than that of the U.S., which would imply that the exchange rate should remain fairly stable. However, the overriding factor is China's currency band, which is likely to be maintained for the foreseeable future. As a result, the yuan will appreciate in the next year, but only by around the same amount as last year, so that the rate will be around 6.17 yuan to the dollar.
Overall, China represents the best option for Dorchester for selling it televisions. This is almost by default. South Africa is facing a weakening rand amid economic uncertainty. The country still has potential, but the timing is wrong given that the macroeconomic conditions are tough and the rand is depreciating faster than the inflation rate. The situation in Japan is worse. The economy might be better, but the yen is depreciating and there is deflation in the economy. This is bad news all round, and earning yen right now it not wise. This leaves China. China has its own problems -- growth is slowing and currency controls mean that there is a difference between earning yuan and being able to return those earnings to the United States. However, the slow appreciation of the yuan and some overtures to convertibility highlight the reality that China is a fairly safe country in which to invest, in terms of currency exchange rate expectations.
The stability is evident in the statistics as well. Between 1880 and 1914, the golden age of the gold standard, inflation averaged 0.1%. Between 1946-2003, even with Bretton oods, inflation average 4.1% (Bardo, n.d.). Short-term price changes, however, could be highly unstable. This is a consequence of the fact that the gold standard ignores fundamental economic principles. Any system where the value of a good is established by artificial means is subject to such shocks. Another drawback to the gold standard is that it gives governments very little discretion over monetary policy. Another drawback is the cost of producing gold. The gold standard relies on having physical gold reserves. Thus, gold must be produced, and for that there is a cost (Ibid).
ith the decline of Bretton oods, the gold standard died. It was replaced by the modern foreign exchange system. At the core of this system are fiat currencies.…
Bordo, Michael D. (no date). The Gold Standard. Concise Encyclopedia of Economics. Retrieved April 11, 2009 from http://www.econlib.org/library/Enc/GoldStandard.html
Cohen, Benjamin. (no date). Bretton Woods System. University of California at Santa Barbara Retrieved April 11, 2009 from http://www.polsci.ucsb.edu/faculty/cohen/inpress/bretton.html
Foreign Exchange isk Management
a) What are the causes of UK and Brazilian markets' revenues in Dollars being lower than expected?
One of the main causes of the revenue in dollars generated from the markets in Brazil and UK being lower than anticipated by the company is due to the depreciation of the countries' currencies against the U.S. dollar. Between January and September, the GBP constantly depreciated against the USD, an aspect that had not been anticipated by the financial team of the company.
b) How is the company doing in these markets?
The company is not operating well in these two markets as the revenues generated in the market have incessantly decreased in the nine months period. As the currency continue to depreciate against the dollar so has the expected revenue depreciated over the period.
c) Based on the given data, should it continue or cease the operations in…
Dohring, B. (2008). Hedging and invoicing strategies to reduce exchange rate exposure: a euro-area perspective. Economic Papers. Retrieved 21 October 2015 from: http://ec.europa.eu/economy_finance/publications/publication11475_en.pdf
Gonnelli, A. (1993). The Basics of Foreign Trade and Exchange. Federal Reserve Bank of New York, Public Information Department.
country can interfere in the foreign exchange markets. In many cases, the motivation for doing so lies with propping up exporters, by lowering the value of the domestic currency. While this is the most common reason for currency manipulation, it is not the only one. In some cases, currency manipulation aids in the cause of making debt disappear, lowering the value of that debt in order that it might be paid back early. This paper will discuss some of the different ways that countries can affect their exchange rates.
A freely-traded currency should reflect the economic strength of a nation, in particular the expectations for future interest rates. Where expectations for future rates are relatively low, that means that the economy is expected to perform worse. This is the case for Japan. The country has adopted a policy recently of a low yen, in order to provide some spark to…
Kim, Y. & Ying, Y. (2007). An empirical assessment of currency devaluation in East Asian countries. Journal of International Money and Finance. Vol. 26 (2007) 265-283.
Palmer, B. (2012). If currency manipulation is so great for exports, why don't we do it? Slate. Retrieved November 24, 2014 from http://www.slate.com/articles/news_and_politics/explainer/2012/10/china_currency_manipulation_how_does_it_harm_the_u_s_and_what_can_we_do.html
Staiger, R. & Sykes, A. (2008). Currency manipulation and world trade. National Bureau of Economic Research. Retrieved November 24, 2014 from http://www.nber.org/papers/w14600
The Economist. (2014). A fistful of dollars, or perhaps not. The Economist. Retrieved November 24, 2014 from http://www.economist.com/blogs/americasview/2014/04/venezuelas-byzantine-exchange-rate-system
forward discount in predicting exchange rate modifications. The conclusion of the literature review is that the forward discount is a biased predictor and that are two possible explanations for this situation. One cause would be the presence of a time varying risk premium, and the other the failure of agents to make rational expectations (the inability to use all available information in an efficient manner).
The forward discount puzzle (as a predictor of exchange rate modifications) is a very discussed puzzle in the international finance literature, since its importance is quite high. As a result, numerous studies have concentrated on this issue, i.e. On the causes on the bias. Some authors (Fama, 1984), believe that this problem is traceable to the existence of a time-varying risk premium. Others connect it to learning effect (Lewis, 1989) or irrationality (Bilson, 1981) the "peso problem" (Krasker, 1980),
The "peso problem term" was introduced…
Beng, G.W. And W.K. Siong. (1993) Exchange Rate Expectations and Risk Premium in the Singapore/U.S. Dollar Exchange Rate: Evidence from Survey Data Applied Financial Economics, 3(4), pp. 365-73.
Bilson, John F.O., (1981) The Speculative Efficiency Hypothesis, Journal of Business, 54, pp. 435-452
Cavalgia, S.W., F.C. Verschoor and C.C.P. Wolff (1993a) Further Evidence on Exchange Rate Expectations Journal of International Money and Finance, 12 (1), pp. 78-98.
Cavalgia, S.W., F.C. Verschoor and C.C.P. Wolff (1993b) Asian Exchange Rate Expectations Journal of the Japanese and International Economics, 7(1), pp. 57-77.
Theoretically speaking, there is only one factor affecting the exchange rate of a country adopting a floating exchange rate regime: the supply and demand of the respective currency on the international market. In this sense, if demand exceeds supply, then the value of the currency will go up and the respective currency will appreciate. On the other hand, if supply exceeds demand, the currency will depreciate and the price of the currency will decrease.
Starting from this statement, however, we can discuss several different factors that make the demand and supply vary, affecting thus the exchange. First of all, we have the level of the interest rate in a country. If the interest rates are higher, then foreign investors will choose to enter the national capital markets, purchase local currency and invest in local bonds or T-bills, which bring high returns, due to high interest rates. This mechanism will lead…
1. Fixed and Floating Exchange Rates. (2003). On the Internet at http://www.tutor2u.net/economics/content/topics/exchangerates/fixed_floating.htm
2. S Johnson (July 2004). Dollar falls as data put focus on U.S. deficit. Financial Times
3. Fixed and Floating Exchange Rates. (2003). On the Internet at
Foreign Monetary System
A monetary system is any structure initiated by the government and mandated to issue currency, acknowledged as the medium of exchange by its citizens and governments of other nations. The central bank manages the monetary system of a country; this same bank has the responsibility of printing money and controlling the economy. Since the colonial period, coins from the European colonies had circulated in all the colonies. The Spanish coins gained dominance due to the scarcity of coins, during this time; the main form of trade was barter trade. The trade-involved items such as rice, tobacco, or animal skins, which took the form of money paper and notes, had varying rates of discount in different colonies rendering them of very low value (onald & Wright, 2006).
The high population in the U.S. called for increased trade and commerce. This forced the United States government to look for…
Ronald, M. & Wright, R.E. (2006). Development of the U.S. Monetary Union. Journal of Financial History Review, 13(1), 19-41.
Anonymous, (2011). Challenges and risks of the International Monetary System. Journal of Economic Review, 22(5), 768.
Eichengreen, B.J. (2008). Globalizing capital: A history of the international monetary system.
Princeton: Princeton University Press.
Market Society and the Public Sphere
My journal text comes to illustrate the utmost significance of globalization viewed as the force molding and shaping the current world. It describes the multidimensional aspect of globalization that influences and encompasses all facets of life through an integrated network. Currently, globalization is the buzzword in media articles, daily talks of media people and talks of politicians. There is no aspect of life that is not influenced or affected by globalization (Tober, 2006, 33). However, many people find it difficult to reflect on this phenomenon. This is because the term is applied in so many aspects leading to its ambiguity in defining it according to my text.
Numerous volumes of work have written about globalization in numerous fields such as political, science, business, economics, sociology and many more. This has made the term globalization lack a precise cogent theory and definition. This is seen…
Barnet, R. & Cavanagh, J. (2004). Global dreams: imperial corporations and the new world order. New York: Simon & Schuster
Hass, R. (2003). The corporation without boundaries. The new paradigm in business: emerging strategies for leadership and organizational change. New York: Tarcher/Perigee.
Kapstein, B. (2004). Governing the global economy: international finance and the state.
Cambridge. MA: Harvard University Press
Exchange Rate Crisis
Exchange rate crises are quite common phenomena in the economic world. From the 1994 Mexican crisis and the 1997 Asian crisis to the 1999 Argentine crisis, currency crises have occurred with a somewhat remarkable frequency. Also, known as currency crises or balance of payments (BOP) crisis, exchange rate crises occur when a country's monetary authority (central bank) has inadequate foreign exchange reserves to sustain its set exchange rates. This is usually caused by trade shocks, persistent budget deficits, foreign interest rate shocks, political uncertainty, banking system weaknesses, and moral hazard problems. An exchange rate crisis is often symbolised by factors such as hyper-inflation, banking crisis, devaluation, and economic recession, clearly indicating the dire consequences a currency crisis can have on the economy. More importantly, an exchange rate crisis can easily spread beyond the national boundary, underscoring the need for measures to prevent the crisis. This paper discusses…
Governments neutralize the monetary impacts of their foreign exchange activities. This sterilization seeks to prevent foreign exchange transactions from posing as obstacles to the domestic monetary policy objectives. The underlying disturbance is likely to cause conflict between governments. When the underlying disturbance to exchange rate originates from the domestic government, it is likely to pursue inflation objectives through non-sterilized foreign exchange interventions (Auerbach & Kotlikoff, 2009).
While other governments have boundaries on investments relating to international financial markets in different currencies, some governments factor objectives of nominal exchange rates into their financial policy decisions. For instance, the federal government occasionally alters the rate of federal funds while it undertakes compatible foreign exchange activities. Erecting the required monetary policy changes across the sale or purchase of foreign currency has a bigger impact on the foreign exchange rate. This is contrary to initiating this move through open market activities in state securities.…
Auerbach, a.J., & Kotlikoff, L.J. (2009). Macroeconomics: An integrated approach. Cambridge, Mass. [u.a.: MIT Press.
Madura, J. (2011). International Financial Management. Florence, KY: Cengage Learning, Inc.
Yotopoulos, Pan a. (2010). Exchange Rate Parity for Trade and Development: Theory, Tests, and Case Studies. Cambridge Univ Pr.
International Monetary System and Exchange ate Policies
A report/essay: chapter 17, multinational companies. select topic research write: Multinational vs. domestic financial management exchange rates international trade international monetary system exchange rate policies trading foreign exchange european monetary union interest
rate parity/purchasing power parity international capital structures.
The international monetary system and exchange rate policies
International Monetary systems
These are a set of rules and that regulate how international trade and payments are handled. It facilitates the exchange of capital, goods and services among countries. However, this system does not have a physical presence but, it consists of interlacing rules and procedures and is influenced by the market of foreign exchange. An example of an international monetary system is the International monetary fund. These interlacing rules and procedures are referred to as exchange rate Policies.
Exchange rate policies
These are rules that officials of public finance from different nations have developed…
Eichengreen. (2011). Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System
Goyal, M., Raman, Wang, and Ahmed; . ( 2011). Financial Deepening and International Monetary Stability.
Michael C. Ehrhardt, & Eugene F. Brigham. (2011). Corporate Finance (4th ed.): Cengage.
OECD. (2011). The Effects of Oil Price Hikes on Economic Activity and Inflation.
Exchange Rate Volatility on Trade Flows
Exchange Rate Volatility
Impact on International Trade Flows
Exchange Rate Volatility
Impact on International Trade Flows
Trade Flow Responsiveness
The dissolution of the Bretton-oods system in 1973 introduced a new era for international markets. No longer would the exchange rates be pegged and fluctuating exchange rates changed the game for international trade and investment. The newly introduced increase in volatility in the foreign exchange markets also increases the risk of uncertainty for all international transactions. The floating rates produce new complexities that have implications for any individual or organization who buys sells, makes, or trades goods or currencies. These implications directly affect nation's balance of trade; however they also literally indirectly affect every individual's lives in one way or another.
The exchange rate volatility has had mixed theories produced by academia in terms of its effects on trade flows.…
BAHMANI-OSKOOEE, M., & KARA, O. (2003). Relative Responsiveness of Trade Flows to a Change in Prices and Exchange Rate. International Review of Applied Economics, 293-308.
Bahmani-Oskooee, M., & Wang, Y. (2008). IMPACT OF EXCHANGE RATE UNCERTAINTY ON COMMODITY TRADE BETWEEN THE U.S. AND AUSTRALIA. Australian Economic Papers, 235-258.
Cheong, Chongcheul, (2004) "Does the risk of exchange rate fluctuation really affect international trade flows between countries?." Economics Bulletin, Vol. 6, No. 4 pp. 1?8
Hegerty, M.B.-O. (2007). Exchange rate volatility and trade. Journal of Economic Studies, 34 No. 3, 211-255
MNE Foreign Pricing, Profits
One of the most challenging areas of a multinational firm's business is setting target pricing and revenue for foreign markets, given the complications arising from currency denominations and exchange rates.
That is because exchange rates demonstrate the linkage between one nation and its partners in the global marketplace. They affect the relative price of goods being traded (exports and imports), the valuation of assets, and of course the final economic yield on those very assets.
In the period of fixed or constant exchange rates these prices, values, and yields were predictable over time. However, since 1973 we have been living in a world of flexible rates where foreign exchange markets determine these rates based on trade flows, interest rate differentials, differing rates of inflation, and speculation about future events.
Exchange rates can be expressed as the foreign price of a domestic currency (i.e., the Euro price…
USD/CNY Currency Exchange elationship
The amount of money passing through a foreign exchange market was pegged at $4.0 trillion per day in April 2010 (Bank for International Settlements, 2010). Among the many currencies traded on the open market, the U.S. dollar (USD) continued to lead the pack by a wide margin; a full 84.9% of all trades involved the USD. By comparison, the Chinese currency (CNY) increased its share of the global FX market from 0.1 to 0.9% between April of 20004 and 2010. To better understand how trade with China impacts the exchange rate this essay will examine monetary policy for both countries.
USD/CNY Foreign Exchange Market
The sum of the current (CA) and capital (CAP) accounts will theoretically be zero if the exchange rate between two currencies is flexible (MacDonald, 2007, p. 7). Since M = + D, where M. is the base money supply, is the…
Bank for International Settlements. (2010). Triennial Central Bank Survey. Report on Global Foreign Exchange Market Activity in 2010. Retrieved 22 May 2014 from http://www.bis.org/publ/rpfxf10t.pdf .
ECR Research. (2014). China's exchange rate policy. Retrieved 22 May 2014 from http://www.ecrresearch.com/chinas-exchange-rate-policy .
ETF Database. (2014). CYB -- Dreyfus Chinese Yuan Fund. Retrieved 22 May 2014 from http://etfdb.com/etf/CYB/ .
MacDonald, R. (2007). Exchange Rate Economies: Theories and Evidence. New York: Routledge.
Domestic debt is also needed for monetary policy purposes including for sterilizing inflows of foreign exchange." (Kahn, 2005) In addition bond markets assist in the provision of interest rates across the maturity spectrum and more efficient pricing of risk. y providing an alternative source of financing they reduce concentration of intermediation in banks. ecause lending can be hedged in the bond market, banks have the ability to lend longer." (Kahn, 2005) Kahn notes that PECC (2004) states general requirements for bond market development which include: (1) the simultaneous development of market width, market depth and market infrastructure; (2) effective coordination among government agencies; (3) close public-private sector partnership; and (4) regulation focusing on maintaining and enhancing transparency and the treatment of taxation. (Kahn, 2005) Kahn concludes by stating that if bond markets are to be development in SSA or in other emerging markets, the role of the state becomes critical,…
Adelegan, O. Janet and Radzewicz-Bak, Bozena (2009) What Determines Bond Market Development in sub-Saharan Africa? International Monetary Fund. IMF Working Paper. Sept 2009. Online available at: http://www.imf.org/external/pubs/ft/wp/2009/wp09213.pdf
Armstrong's Guide to Investing and Doing Business in Botswana (2008) Online available at:
Developing Government Bond Markets (2001) International Monetary Fund -- A Handbook. 2001 July. Washington, D.C.
exchange rate risk can be hedged. The current cost of the room is £50 per day, which is: 50 * 1.50 = $75.00. For a consumer, the easiest way to hedge this risk would be to purchase pounds today, so that the cost of those pounds is locked in. The transaction is a money-loser because of the time value of money, except that in this situation the nominal amount of pounds is locked in, so the nominal amount of pounds needed will not change. Only the opportunity to make interest on that money changes. For £50 and one year, this amount is negligible, but for larger transactions the time value of money is significant and important, making this an undesirable option.
If the transaction was larger, it could be hedged on the futures market or with interest rate swaps. A forward contract could also be purchased. Futures have a downside…
Investopedia. (2011). How are futures used to hedge a position. Investopedia. Retrieved March 27, 2011 from http://www.investopedia.com/ask/answers/06/futureshedge.asp
"Foreign exchange forward." (2010). Montego Data. Retrieved March 27, 2011 from http://www.montegodata.co.uk/consult/fx/fxforward.htm
The first step is setting up an investment account is to understand the client. Everything flows from this. The client profile is developed through an extensive interview process, wherein the advisor seeks to gain an understanding of the client's personal circumstances, current and envisioned financial situation, risk tolerance and investment knowledge (Anthony, 2011). With this information, the financial advisor can then build a profile based on the portfolio objectives and risk constraints. For this portfolio, the focus will be on exchange-traded funds. The objective of this exercise is to build the optimal portfolio for the client, taking into account the client's personal circumstances and the variety of funds that are available to build the portfolio.
The client is a male, late 20s, with a long-term girlfriend. They have no current plans for children. They are American, living and working in Miami, and therefore are eligible to purchase…
Anthony, M. (2011). The evolving client profile. Financial Advisor Magazine. Retrieved November 30, 2013 from http://www.fa-mag.com/news/the-evolving-client-profile-7650.html
Baidu 2012 Annual Report. Retrieved November 30, 2013 from http://media.corporate-ir.net/media_files/IROL/18/188488/BaiduAR2012.pdf
BIO. (2013) What is biotechnology? Biotechnology Industry Organization. Retrieved November 30, 2013 from http://www.bio.org/node/517
CBO. (2013). Economic projections. Congressional Budget Office. Retrieved November 30, 2013 from http://www.cbo.gov/topics/economy/economic-projections
a) As the AUD is gaining value (buying power) and the EUR is losing value over time, June is in an excellent position with her European suppliers granting her a 60-day credit period and her Australian customers paying on 30-day credit terms: the AUD she receives in payment within 30 days will be worth more in EUR 30 days later, when her own payments are due, meaning she will save money.
b) One hedging strategy June could employ to shield against movements in either direction by either currency would simply be to shorten credit terms with suppliers and customers, paying as soon as bills were in and collecting as fast as possible, in a currency-swap type scenario. This has other business implications that would not necessarily be beneficial, however. June could also use forward contracts, locking in agreed-upon exchange rates for future purchases and sales over longer periods…
S. billion in 1998. eported as the dominant source of inward FDI in China is that of Hong Kong, followed by Japan, the U.S. And Taiwan.
Summary and Conclusion
This study set out to examine Foreign Direct Investment in China by the multinational enterprise. At present China is a primary source for foreign direct investment due to the favorable laws and regulations governing Foreign Direct Investment in China and the attempt to make location siting of the organization equitable and fair. China has been attempting to pull the company in line with their own expectations as have the multinational enterprises who desire to directly invest foreign funds into China.
Investment (2008) Multinational Corporations. Cush & Wakefield. etrieved from: http://www.cushwake.com/cwglobal/jsp/audienceDetail.jsp?audienceId=18&Country=900095&Language=EN&groupBy=audience
Kroll, CA and Bardhan, a. (2007) Globalization and the eal Estate Industry: Issues, Implications, Opportunities Haas School of Business, UC Berkeley, Paper Prepared for the Sloan Industry Studies Annual Conference.…
Investment (2008) Multinational Corporations. Cush & Wakefield. Retrieved from: http://www.cushwake.com/cwglobal/jsp/audienceDetail.jsp?audienceId=18&Country=900095&Language=EN&groupBy=audience
Kroll, CA and Bardhan, a. (2007) Globalization and the Real Estate Industry: Issues, Implications, Opportunities Haas School of Business, UC Berkeley, Paper Prepared for the Sloan Industry Studies Annual Conference. Cambridge, April 2007. Retrieved from: http://web.mit.edu/sis07/www/kroll.pdf
MULTINATIONAL CORPORATIONS (nd) Cush and Wakefield. Retrieved from:
S. directly. Evidently, the long-term objectives indirectly face the smooth running of the U.S. government. Priority should be given to those aspects that will pull the resources of the country to extreme levels. The U.S. As a super-power is privileged when tackling issues affecting other nations; it is mandated to help developing long-term solutions.
Long-term also implies that the impacts and effects need to be widespread in order to maintain balance and ensure the prosperity of all sectors is recognized. The above long-term objectives are issues that need time and resources in order to be able to resolve the issue that affects the stability of these countries among other issues. The Soviet Union, for example, is crying to have political relations with ussia. This means that the military forces will be deployed to this country. However, the negotiation process is hefty and requires time and adequate resources in order to…
Bruce, J. & Bennett, M. (2008). "Foreign Denial and Deception: Analytical Imperatives,"
Analyzing Intelligence: Origins, Obstacles, and Innovations. Washington, DC:
Burch, J. (2008). The Domestic Intelligence Gap: Progress Since 9/11? Homeland Security
It revealed the fact that customers were willing to buy chocolate in order to be in fashion.
The government, which is a communist one, has imposed chocolate importers to mark the country of origin in order to provide the customers with the accurate information about the products they offer.
Size, number, and financial strength of competitors. If we take into consideration the report mentioned above, the main competitors are: Dove (38.61%), Cadbury, Le Conte, Nestle, Hershey's, Golden Monkey, Ferrero Rocher, M&M's, Tresor Dore and Shenfeng. These ten producers account for 90% of the chocolate market, while the first three cover about two thirds of the market share. However, among these ten best companies we can only depict two internal brands. These are Golden Monkey (2.94%) and Shenfeng (1.58%). Due to the new regulations regarding the percentages and quality of the ingredients used, many national producers may not be able to…
Chocolate Strives for Standard.,(2004) Retrieved on Nov 28th, 2006 from China Daily, web site: http://www.chinadaily.com.cn/english/doc/2004-12/24/content_402994.htm
Parry, Richard Lloyd, (2006), For Lovers of Chocolate, future could be very dark., Retrieved on Nov 28th, 2006, from The Times, web site: http://www.timesonline.co.uk/article/0,25689-2079799,00.html
Sachs, Jeffrey D. (2004), Welcome To The Asian Century. By 2050, China and maybe India will overtake the U.S. economy in size. Retrieved Nov 28th, 2006, from Fortune, web site: http://money.cnn.com/magazines/fortune/fortune_archive/2004/01/12/357912/index.htm
Foreign Corrupt Practices Act
Foreign Corrupt Practices Act: How this affects U.S. business interests overseas
Simply because United States corporations do business in nations with different ethical standards does not mean that U.S. companies get a free legal 'pass' regarding how they comport themselves abroad. "The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. § 78dd-1, et seq. ('FCPA'), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business" (FCPA, 2012, DOJ). Even if bribery is an accepted aspect of doing business in the developing world, a U.S. business will still run afoul of the FCPA if it complies with this type of 'cultural tradition.' The "payment of money or anything of value to any person, while knowing that all or a portion of such money or…
Adkins, Robb & Segal, Dina. (2012). Is FCPA Enforcement in Russia the Next China? Law.com.
Barstow, David. (2012). Vast Mexico bribery case hushed up by Wal-Mart after top-level struggle. The New York Times. Retrieved:
Managing Exchange ate isk
For a number of multinational corporations, currency fluctuations can pose an extreme risk for them. This is because of sudden changes and dramatic amounts of volatility inside the marketplace can have a negative effect on their bottom line results. When this happens, there is a realistic possibility that these challenges could negatively impact their financial position and ability to compete inside many different markets. (Berger, 2011)
In the case of Fed Ex, the company has operations around the globe and is one the larger overnight package delivery services. This means that sudden shifts in the currency could negatively impact their earnings. To fully understand the overall scope and the way they are able to deal with these challenges requires focusing on how this impacts their operations, options financial managers can use to manage it and the benefits / drawbacks of these strategies. Together, these elements will…
Fed Ex. (2013). Yahoo Finance. Retrieved from: http://finance.yahoo.com/q/pr?s=FDX+Profile
Fed Ex First Quarter Results. (2012). IPC. Retrieved from: http://www.ipc.be/en/Newsroom/General%20news/FedEx%20reports%20first-quarter%20results
Berger, A. (2011).Case Study Fed Ex Corporation. Nordstadt: Verlag.
Grady, G. (2010). Foreign Exchange Risk Management Methods. E Zine Articles. Retrieved from http://ezinearticles.com/?Foreign-Exchange-Risk-Management-Methods&id=3047383
International Financial Markets and Institutions:
Throughout the globe, today's landscape of international financial market and institutions has continued to experience several changes that require practitioners to examine new models. The need for practitioners to examine new models that are relevant to the state of these markets and institutions has also been necessitated by the recent events that contribute to financial crises, which have been very dramatic. Actually, the recent financial crisis has had significant impacts on the financial institutions and markets resulting in the need for changes. International financial markets and institutions have become an important aspect of economies because they affect daily life. This is primarily because they involve the huge flow of different types of funds in the entire economy that in turn impact the profits of businesses, production of goods and services, and economic well-being of countries. In some cases, the events in these institutions and markets…
Accounting Education (2010), International Capital Market, Accounting Education, viewed 7
Australian Securities Exchange (n.d.), Absolute Return Funds, Australian Securities Exchange,
viewed 7 June 2012,
27-29) This provoked financial demands and awareness of the people in different parts of the world. People and businesses are dissatisfied with the traditional financial systems due to lack of opportunities for investors. Businesses today require more diversified portfolios for investments because this will reduce their investment risks and increase the probability of future capital flows.
Increased capital mobility has increased the importance of exchange rates which is serving as a monetary policy channel in some industrialized economies. In mid 2000s, there was a sharp shift in the flow of international investments and savings (geographic pattern) resulting in the segmentation of current account imbalances. This was also a major contributing factor. Additionally, the domestic financial markets were also affected by the change in regulatory environment. The two important factors for this are as follows:
1. apid growth of OTC (over-the-counter) markets of derivatives in terms of complexity as well as…
Bekaert, G., Harvey, C. And Lundblad, C. 2005. Does financial liberalization spur growth? Journal of Financial Economics 77, 3 -- 55.
Edison, H., Klein, M., Ricci, L. And Slok, T. 2004. Capital account liberalization and economic performance: survey and synthesis. IMF Staff Papers 51, 111 -- 115.
Kaminsky, G. And Reinhart, C. 1999. The twin crises: the causes of banking and balance-of payments problems. American Economic Review 89, 473 -- 500.
Klein, M. 2005. Capital account liberalization, institutional quality and economic growth: theory and evidence. Working Paper No. 11112. Cambridge, MA: NBER, pp.19-21.
4 trillion to about $5 trillion dollars at the end of 2008 to support a rise in U.S. net external debt from $3.3 trillion to $7.4 trillion. (Ibid. 6) Continued financing of the U.S. trade deficits by the rest of the world is also not without its long-term problems: the U.S. would accumulate so much debt over time that the ultimate cost of adjustment would become too high for the U.S. economy. Hence, all indicators regarding the sustainability of the U.S. trade deficit are blinking red, despite the brave face that the Bush administration puts on the issue.
Is China the Source of the Deficit Problem?
The U.S. administration believes that the alleged under-valuation of the Chinese Yuan is the source of its deficit problems since there is a huge and growing trade imbalance between the U.S. exports and imports to China. The U.S. Senate recently passed a bill, threatening…
Balance of Trade." (2005). [Online]. Wikipedia the Free Encyclopedia. Available from: http://en.wikipedia.org/wiki/Trade_deficit [19 April 2005]
Beck, B. (12 April 2005). "It's more than the deficit, stupid!" [Online]. Political gateway. Available from: http://www.politicalgateway.com/main/columns/read.html?col=334[19 April 2005]
Cock-a-doodle-doo" (3 Feb 2005). [Online]. The Economist. Available from: http://internationalecon.com/MyCourses/News%20Stories/Economist_com%20%20China's%20exchange%20rate.htm[19 April 2005]
Mann, C.L. (1999). Is the U.S. Trade Deficit Sustainable? Washington D.C: Institute for International Economics
isks in Export Market
There is need for companies to develop a professional approach before venturing into the exporting business. The management of the company is supposed to be committed extremely as well as devoting time and money in commencing the campaigns of export. A company is supposed to be ready to face greater competition as well as more stringent rules and regulations concerning products and packaging due to the variance in rules to which or across which the company will be exporting.
In the process of exportation, there are a number of risks that the company will face. These elements of risks are encountered in every commercial transactions as well as the complexity of the environments that exporters operate in. The content of this paper will analyze risks that a company can face while entering the field of exporting as well as discussing the roles of intermediaries in the…
Aaby, N. & S. Slater. (1989). Management Influences on Export Performance: A Review of the Empirical Literature1978-88. International Marketing Review, 6: 7-26.
Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, (2007). "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17: 99-120.1997. Gaining and Sustaining Competitive Advantage. Reading, MA: Addison.
Cornelius Bothma (2012). Managing your export risk. EXPORTHELP. Retrieved April 13, 2012 from http://www.exporthelp.co.za/modules/10_risk/intro.html
due to changes in the economical, financial, political and technological changes, the capital markets across the world are highly influenced by the changes. As compared to the past, the development in the financial sector has been observed to be at the highest rates. In order to understand and analyze the changes in the global capital markets the below report has been constructed.
Based on the theme idea, which is the change in the capital market due to many factors and elements, the report below tends to discuss and analyse the impacts of financial deregulation and capital control on financial globalization and international diversification. This will allow understanding of how these two elements are supporting the financial globalization. A part from this, the report will also analyze the role of financial innovation and advancements and technologies on international investments. Moreover, the risks and benefits that are associated with the carry trade…
Buch CM, 2004, Globalization of Financial Markets: Causes of Incomplete Integration and Consequences for Economic Policy, Springer, Germany
Collier P & Dollar D, 2002, Globalization, Growth & Poverty, Oxford University Press, GB
Henderson C, 2006, Currency Strategy, John Wiley & Sons, USA
Lien K, 2009, Day Trading and Swing Trading the Currency Market, 2nd Edition, John Wiley & Sons, Canada
popularity of foreign restaurant: consumer attitude and behavior toward foreign cuisines in Bangkok
Thailand as a tourist destination
Thailand has become a tourist destination hotspot for its scenic beauty, the humble nature of their people, and the relative value of foreign currencies relative to the baht. According to EIU ViewsWire (2003), "Growth in the tourism industry in recent years was the result of the depreciation of the baht against non-Asian currencies (which improved competitiveness relative to destinations outside the region), aggressive marketing campaigns and an increase in the number of airlines offering flights to Thailand." (EIU ViewsWire, 2003)
Additionally, according to EIU ViewsWire (2003), "Tourist arrivals rose by 5.8% to just over 10m in 2001, despote the global economic downturn and the September 11 terrorist attacks in the U.S., bringing in Bt 295bn (U.S. $6.6 bn) in revenue. Thailand benefited from its reputation as a safe and stable society and…
"A century of certification," 2003, Health and Hygiene, vol. 24, no. 2, pp. 12-12-13.
Anne-Mette Hjalager & Magda, A.C. 2000, "Food for tourists -- determinants of an image," The International Journal of Tourism Research, vol. 2, no. 4, pp. 281-281.
Asia's Biggest Sourcing Event for Foods and Beverages Ever Kicks Off This Week 2011,, PR Newswire Association LLC, United States, New York.
Chen, M. 2009, "Attitude toward organic foods among Taiwanese as related to health consciousness, environmental attitudes, and the mediating effects of a healthy lifestyle," British Food Journal, vol. 111, no. 2, pp. 165-165-178.
Managing exchange rate risk can be a daunting task for many international firms attempting to expand overseas, acquire new companies, or simply manage its cash flows. Globalization has created a dynamic environment in which competition can arise to disrupt entire industries. Aspects such as technology, pharmaceuticals, banking, and automobiles have all experienced rapid change as a result of globalization and the competitive forces that underline it. As a result, companies, particularly smaller firms, have a higher propensity to experience volatile earnings overtime. Aspects that impact one sector of the globe can have a residual impact on other areas of the individual firm or industry. Managing exchange rates is therefore a viable option for firms to reduce volatility in earnings while subsequently managing its cash flows from operations. Below, is a 5 step program which could be implemented by a firm attempting to manage its exchange rate risk after an…
1. Jorion, Philippe (2009). Financial Risk Manager Handbook (5 ed.). John Wiley and Sons. p. 287. ISBN 978-0-470-47961-2.
2. Bartram, Sohnke M. (2006). "The Use of Options in Corporate Risk Management." Managerial Finance 32 (2): 160 -- 181
Investors from all over the world sunk money into Dubai-based projects, including those of Dubai orld. The global financial crisis, however, has slowed the Dubai economy to such a degree that it can no longer meet its debt obligations. Global investors who had been counting on high returns at relatively low risk are now seeing the value of their debt holdings diminish.
The fluid movement of capital around the world has allowed for thousands of powerful investors to put money into Dubai's economic development, which spreads the risk of such development around the world. Thus, when Dubai's economy falters and the state-run company cannot pay its debts, it reverberates around the global financial markets, which now must deal with Dubai's apparent lack of creditworthiness.
Giddy, I. (1993). Global Financial Markets. Boston: South-estern College Publishing.
No author. (2009). Standing still but still standing. The Economist. Retrieved November 27, 2009…
Giddy, I. (1993). Global Financial Markets. Boston: South-Western College Publishing.
No author. (2009). Standing still but still standing. The Economist. Retrieved November 27, 2009 from http://www.economist.com/businessfinance/displayStory.cfm?story_id=14977157
The process would then need to continue so that the changes that can be seen in the environment can also affect the changes in entry strategies.
Environmental factors, economic factors, political/legal factors, social/cultural factors and also technological factors should all be considered. The legal factors that need to be addressed include issues in employee law, monopolies and mergers legislation, environmental protection laws, and wider issues such as foreign trade regulations. The political factors refer to the stability of the government. The taxation policy, the government spending, the relationship that the government has with other countries, and the industrial policy and all issues should be considered.
The economic factors that need to be addressed refer to inflation, disposable income, unemployment, business cycles, GNP growth rates, interest rates, exchange rates, energy, and the basic prices for raw materials. Factors from cultural and social standpoints include population demographics, the income distribution, what levels…
Altman, E. & Kao, D.L. (1991). Corporate Bond Rating Drift: An Examination of Rating Agency Credit Quality Changes Over Time. New York University-Salomon Brothers Working Paper S-91-40.
Billet, M. (1996). Targeting Capital Structure: The Relationship Between Risky Debt and the Firm's Likelihood of Being Acquired. Journal of Business.
Ederington, L., Yawitz, J., & Roberts, B. (1987). The Information Content of Bond Ratings. Journal of Financial Research 10, 3 (fall): 211-26.
Kaplan, R. & Urwitz, G. (1979). Statistical Models of Bond Ratings: A Methodological Inquiry. Journal of Business 52, 2: 231-61.
AU Dollar and Japanese Beef Market
Appreciation of AUD 2012-2013- The AUD has had a strong appreciation over the past decade, which has led many scholars to be concerned about the impact the high exchange rate may have on certain trade-exposed sectors of the economy. Over the past few years the AUG has generally been on an upswing, at least on eal GNE, in particular since the trade boom began around 2004. The primary reason for the AUD's appreciation is that Australia's terms of trade have doubled since the millennium, with a particular rise in commodity export prices in the last few years. This has happened because higher commodity prices lead to increased investment that expands capacity in the resources sector and higher aggregate incomes result from the rise in trade -- then the rise in consumption spending on domestic products. The higher exchange rate then promotes the reallocation of…
Aussie Dollar Barometer. (14 June 2013). Retrieved from: https://www.commbank.com.au / content/dam/commbank/corporate/research/publications/foreign-exchange/aussie-dollar-barometer/2013/140613-ADB.pdf
Beeson, M. (n.d.) Bilateral Economic relations in a Global Political Economy: Australia and Japan. Espace library. Retreived from: http://espace.library.uq.edu.au/eserv.php ? pid=UQ:10524&dsID=mb_cc_pre97.pdf
Garton, P., et al. (2012). Understanding the appreciation of the Australian Dollar and its policy implications. Treasury.gov.au. Retrieved from: http://www.treasury.gov.au/~/media / Treasury/Publications%20and%20Media/Publications/2012/Economic%20Roundup%20Issue%202/Downloads/03_Appreciation_of_the_Aust_dollar.ashx
Paish, M. (17 January 2012). Big Drop in Australian Meat Exports to Japan. AFN Food For Thought. Retrieved from: http://www.ausfoodnews.com.au/2012/01/17/big-drop-in-australian-meat-exports-to-japan.html?utm_source=feedburner&utm_ medium=email&utm_campaign=Feed%3A+AustralianFoodNews+%28Australian+Food+News%29
Transaction exposure risk may be defined as "cash flow risk" and is associated with the impact of FX rate moves on exposure due to transactional accounts, regarding exports, import or dividend repatriation: and FX "rate change in the currency of denomination of any such contract will result in a direct transaction exchange rate risk" (Papaioannou, 2006, p. 4), thus impacting the multinational corporation in terms of affecting the inflow and outflow of cash over a given period.
Translation risk may be defined as the FX rate risk associated with the balance sheet of a company's holdings. The notion is that exchange rates affect the value of a subsidiary in a foreign country and in instances where the subsidiary is consolidated to the parent balance sheet, the risk becomes translational. The way to measure this risk for a company is by assessing the net asset exposure and measuring it against…
Bodnar, G. (2015). Techniques for managing exchange rate exposure. Wharton/UPenn.
Retrieved from http://finance.wharton.upenn.edu/~bodnarg/courses/readings/hedging.pdf
Dohring, B. (2008). Hedging and invoicing strategies to reduce exchange rate exposure:
a euro-area perspective. Economic Papers 299, European Commission.
It is likely that the retrieved results will indicate a cost of not hedging significantly larger than that of hedging.
Dozier Industries has a long standing tradition and a favourable reputation. The company worked mainly with the military, but also came to engage in civilian contracts. Having operated mostly nationwide, the UK-based company is now presented with the opportunity of conducting international activities. This however implies both benefits, as well as limitations.
A relevant limitation is given by the risks implied by the exchange rates, namely by their future and unknown fluctuations. This is the main reason why organizations choose to sign hedging contracts. The most common hedging alternatives are the forward, futures and option contracts. The option contracts are the most flexible ones, but they do present an additional risk for the seller, ergo employing the premium.
Despite the advances in the financial market, there still are…
Giddy, I.H., the Corporate Hedging Process, New York University, Stern School of Business, http://pages.stern.nyu.edu/~igiddy/corphdg.html . Ast accessed on January 29, 2009
Meera, a.K.M., 2002, Hedging Foreign Exchange Risk with Forwards, Futures, Options and the Gold Dinar: A Comparison Note, Department of Business Administration, Retrieved at http://lariba.com/knowledge-center/articles/pdf/Malaysia%20-%20GOLD%20-%20Hedging%20With%20Dinar.pdfon January 29, 2009
2009, Hedge, Investopedia, http://www.investopedia.com/terms/h/hedge.asplast accessed on January 28, 2009
1986, Dozier Industries, Stanford University
The turnaround could only start with the restructuring of the management team. Among the different communication problems identified, one with most impact on the overall situation at the bank was the lack of communication between the managerial team and the board and, quite often, between the managerial team and the structures in its subordination (such as the auditing and risk management departments).
The new leadership had no problem to work the restructuring of the management team by simply headhunting capable people, with experience in troubleshooting, from other financial institutions. Such a complete change of the management team needed to be performed carefully, because entire personnel changes could very well have an impact on the morale of the entire bank. The challenge of the new management also became to glue together the new team.
Along with the organizational restructuring also came a need to tackle the bureaucracy that had hampered so…
1. Organizational Restructuring: Management & Analysis. May 2009. On the Internet at http://www.articlesbase.com/organizational-articles/organizational-restructuring-management-analysis-945103.html . Last retrieved on May 6, 2010
2. Stevenson, William; Bartunek, Jean; Borgatti Stephen. Front and Backstage Processes of an Organizational Restructuring Effort. The Journal of Applied Behavorial Science. September 2003
3. Thomson, Diane; Jain, Ameeta. Accountability and Board Functionality: National Australia Bank's experience. September 2006. On the Internet at http://www.melbournecentre.com.au/Finsia_MCFS/Monday/Stream%202/DianneThomson_paper.pdf. Last retrieved on May 6, 2010
4. Acquaah-Gaisie, G. Enhancing Corporate Accountability in Australia. Australian Journal of Corporate Law, Vol. 11, pp 139-148. 2000
Changes in the spot rate of exchange between two countries can occur as the result of a change in the relative interest rates in those countries, a change in the balance of trade between those countries and changes in the inflation rates in those countries (Van Bergen, 2015).
The two that are most closely followed are the differences in the interest rates, and the differences in the inflation rates.
A forward is a contract that is written between a party and a counterparty, to exchange currency in a set amount at a set rate in the future. This is proprietary between the parties. A future is publicly-traded. So while it also sets a future date and price for a currency, it is publicly traded, the dates do not change, and the amount is fixed -- to increase the amount you have to buy or sell more futures.…
Van Bergen, J. (2015). 6 factors that influence exchange rates. Investopedia. Retrieved December 23, 2015 from http://www.investopedia.com/articles/basics/04/050704.asp
fixed and floating exchange rates mechanisms are the exact opposites of one another, the advantages of one are generally the disadvantages of the other. Anyhow, in order to be able to evaluate for each case in part its positive and negative aspects, we should start with defining each, as most of the advantages and disadvantages derive there from.
The fixed exchange rate mechanism refers to a mechanism where "the government (central bank) sets and maintains the official exchange rate)
." The key word in this mechanism is pegging, which means that the currency has a price set against a major currency of the world and that the central bank ensures that this rate is kept throughout the entire period the currency is pegged.
The main advantage in this case refers to stability. Indeed, a fixed exchange rate mechanism helps eliminate or speculative activity on the respective currency. With no more…
1. Heakal, Reem. Fixed and Floating Exchange Rates. February 2003. On the Internet at http://www.investopedia.com/articles/03/020603.asp
2. Fixed and Floating Exchange Rates. (2003). On the Internet at http://www.tutor2u.net/economics/content/topics/exchangerates/fixed_floating.htm
Heakal, Reem. Fixed and Floating Exchange Rates. February 2003. On the Internet at
Managing Financial isk including Currency Exchange ate isks
Deere and Company are suffering as the string dollar is impacting negative on sales in the Euro zone. The firm is suffering not only due to the exchange rate, but also the high level of competition from other European firms that are operating in the Euro.
If companies operate across international boarders they will face risks associated with exchange rate movement. In the case of a strong home currency, this will make the goods more expensive to purchase if the pricing is based in the home currency. The basing of the price on the dollar, even if it is converted to Euro's effectively passes the risk to the purchaser. The impact can be the price becoming uncompetitive, especially when there are firms that are basing their pricing structure on the same currency as the purchasers.
The firm may deal with the…
Howells P.G.A, Bain, K, (2007), Financial Institutions and Markets, London, Longman
WalMart, (2014), WalMart Annual report, accessed at http://stock.walmart.com/annual-reports
U.S. Department of Commerce
South Africa’s population of 50 million enjoys the most sophisticated, mature and productive economy on the African continent today (U.S. commercial service, 2014). The country’s GDP represents approximately 33 percent of the sub-Saharan total and the South African economy has experienced sustained growth of 3.2 percent over the past 5 years (US commercial service, 2014). According to the U.S. Department of Commerce, “The U.S. Commercial Service in South Africa is co-located with the U.S. Consulate General [with the] mission to create jobs in the United States by advancing commercial opportunities in South Africa and strategically assisting firms export U.S. products and services” (U.S. commercial service, 2014, para. 2).
World Trade Organization
The World Trade Organization’s (WTO’s) most recent policy review (2008) shows that during the period from 2003 through 2008, the percentage of trade in goods and services to South Africa’s GDP rose from 53.8% to…
Pharmaceutical industries have to operate in an environment that is highly competitive and subject to a wide variety of internal and external constraints. In recent times, there has been an increasing trend to reduce the cost of operation while competing with other companies that manufacture products that treat similar afflictions and ailments. The complexities in drug research and development and regulations have created an industry that is subject to intense pressure to perform. The amount of capital investment investments required to get a drug from conception, through clinical trials and into the market is enormous. The already high-strung pharmaceutical industry is increasingly investing greater amounts of resources in search of the next "blockbuster" drug that can help them gain market position and profits. Laws, regulations and patents are important to the industry while spending billions of dollars in ensuring the copyright of their products.
It is the intention of this…
Ansoff, H.I. (1957). Strategies for diversification. Harvard Business Review, 35(5), 113-124.
Ansoff, H.I. (1965). Corporate Strategy. New York, NY: McGraw-Hill.
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Bain, J.S. (1954). Economies of scale, concentration, and the condition of entry in twenty manufacturing industries. American Economic Review, 44, 15-36.
Globalization and Education
Globalization involves a number of different elements, including economic integration, freedom of capital movements, and the increasing "transfer of knowledge, cultural stability" and an increase in cultural interactions (Al-odhan, 2006). The process of globalization has been fostered by industrial-age improvements in transportation, communication and through political and economic liberalization. One of the antecedents of the era of globalization was the creation of the European Common Market. When this was extended to not only allow for goods and capital to move more easily across borders but labor as well, this ushered in a new era of mass migration. Today, many of the world's leading cities have incredibly diverse populations, as people from all over the world are drawn by the economic promise of major urban hubs. One of the areas where this trend can be seen is with education. For decades, education has been trumpeted as a pathway…
Al-Rodhan, N. (2006). Definitions of globalization. Geneva Centre for Security Policy. Retrieved November 17, 2015 from http://s3.amazonaws.com/academia.edu.documents/30929642/Definitions_of_Globalization_-_A_Comprehensive_Overview_and_a_Proposed_Definition.pdf?AWSAccessKeyId=AKIAJ56TQJRTWSMTNPEA&Expires=1447724149&Signature=KHFcmax%2BQD8oIUr9BWJZz%2BFEzb4%3D&response-content-disposition=inline%3B%20filename%3DDefinitions_of_Globalization_A_Comprehen.pdf
Grootaert, C. (1994). Education, poverty and structural change in Africa: Lessons from Cote d'Ivoire. International Journal of Educational Development. Vol. 14 (2) 131-142.
Kwiek, M. (2001). Globalization and higher education. Higher Education in Europe. Vol. 16 (1) 27-38.
Vaira, M. (2004). Globalization and higher education organizational change: A framework for analysis. Higher Education. Vol. 48 (2004) 483-510.
International Currency Markets
How did George Soros make money in the international currency markets? as it something to do with his understanding of the international financial system, or just good luck?
Hungarian-born George Soros started making a name in financial speculation in the late 1960s, when he started investing with his own fund known as the Quantum Fund. Soros's speculations began making big news and he was able to gather a rather large following. The bulk of his fortune came from attacks on major currencies. For example, he was able to off major attacks on the currencies of Great Britain and Italy by speculating against them. Soros would bet against the currencies on the exchange rate market in a big way. The news of Soros's moves would also gather a lot of publicity that furthered his cause. Once the market knew that Soros had bet against these countries then…
Baby Pips. (N.d.). How You Make Money in Forex. Retrieved from Baby Pips: http://www.babypips.com/school/how-you-make-money-in-forex.html
Delaney, D. (2008, June 25). Currency Forex Trading. Retrieved from Ezine: http://ezinearticles.com/?Currency-Forex-Market-Trading-How-Do-People-Make-Money-From-It?&id=2905108
Wal-Mart Accounting and Finance
Determine whose rate of return (i.e., local or parent currency returns) Wal-Mart should use when evaluating foreign direct investment opportunities and justify the position.
Foreign Direct Investment (FDI) is an international flow of capital that provides a parent company or multinational organization with control over foreign affiliates. The behavior of exchange rates influences FDI activity. Exchange rates are defined as the domestic currency price of a foreign currency. Exchange rates can influence both the total amount of foreign direct investment that takes place and the allocation of this investment spending across a range of countries (Bogoslaw, 2009).
Wal-Mart is among many multinational companies that have expanded production and distribution networks globally to take advantage of opportunities for higher local rates of return, market share, and accessibility to production inputs (Nathan, 2012). This -- along with foreign government import restrictions, opening of new markets and invitation for…
Bogoslaw, D. (2009). Emerging Markets: Time to Invest?. Businessweek Online, 8.
Huang, Q., Nijs, V., Hansen, K., & Anderson, E. (2012). Wal-Mart's Impact on Supplier Profits. Journal Of Marketing Research (JMR), 49(2), 131-143. doi:10.1509/jmr.10.0256.
Marshall, J. (2000). Minor Change, Big Impact. Financial Executive, 16(6), 11.
Nathan, A.J. (2012). Wal-Mart in China. Foreign Affairs, 91(3), 190-191.
Another reason why corporations choose to hold cash balances in a centralized repository is that the variety of accounts can be better managed as a mutual fund more complex investment structure than would be the case if the subsidiary alone managed the funds. A greater quality of information is available for example in the leading financial centers globally that would otherwise not be the case in more remote regions, making it possible to make more informed and correct decisions (Mitsos, 1997). The accuracy, efficiency and speed of decision-making based on more efficient use of information has led to more advanced forms of cash management than would have been the case on a per-subsidiary level (Fresard, Salva, 2010). Lastly, by having a centralized depository of cash for all subsidiaries, firms can hold less accumulated total cash, freeing up financial resources for other investments (Fresard, Salva, 2010). Companies become more efficient at…
Elliott, Graham, & Bewley, Ronald. (1994). The transmission of monetary policy: The relationship between centralized depositories and Monetary policy. Economic Record, 70(208), 19.
Fresard, L., & Salva, C.. (2010). The value of excess cash and corporate governance: Evidence from U.S. cross-listings. Journal of Financial Economics, 98(2), 359.
Hill, C.W.L. (2011). International business: Competing in the global marketplace (8th ed.). New York, NY: McGraw-Hill/Irwin.
Nicholas Mitsos. (1997, November). Virtual Group Treasury. TMA Journal, 17(6), 24-30.
Foreign Policy of China (Beijing consensus)
Structure of Chinese Foreign Policy
The "Chinese Model" of Investment
The "Beijing Consensus" as a Competing Framework
The U.S.-China (Beijing consensus) Trade Agreement and Beijing Consensus
Trading with the Enemy Act
Export Control Act.
Mutual Defense Assistance Control Act
The 1974 Trade Act.
The Operational Consequences of Chinese Foreign Policy
The World Views and China (Beijing consensus)
The Managerial Practices
Self Sufficiency of China (Beijing consensus)
China and western world: A comparison
The China (Beijing consensus)'s Policy of Trading Specialized Goods
The versions of China (Beijing consensus)'s trade development
The China (Beijing consensus) Theory of Power Transition
Foreign Policy of China (Beijing consensus)
ACD arms control and disarmament
ACDA Arms Control and Disarmament Agency
ADB Asian Development Bank
ADF Asian Development Fund
APEC Asia-Pacific Economic Cooperation
AF ASEAN [Association of Southeast…
Barnett, A.D. (1977). China (Beijing consensus) and the Major Powers in East Asia. Washington, DC: The Brookings Institution. Retrieved September 10, 2011, from Questia database: http://www.questia.com/PM.qst?a=o&d=34158088
Boorman, H.L., Eckstein, A., Mosely, P.E., & Schwartz, B. (1957). Moscow-Peking Axis: Strengths and Strains (1st ed.). New York: Harper & Brothers Publishers. Retrieved September 10, 2011, from Questia database: http://www.questia.com/PM.qst?a=o&d=53424557
Sardesai, D.R. (1974). Chapter 6 India: A Balancer Power?. In Southeast Asia under the New Balance of Power, Chawla, S., Gurtov, M., & Marsot, A. (Eds.) (pp. 94-104). New York: Praeger. Retrieved September 10, 2011, from Questia database: http://www.questia.com/PM.qst?a=o&d=14691923
Chawla, S., Gurtov, M., & Marsot, A. (Eds.). (1974). Southeast Asia under the New Balance of Power. New York: Praeger. Retrieved September 10, 2011, from Questia database: http://www.questia.com/PM.qst?a=o&d=14691822
U.S. Macro economy
economy which was considered to be the world's largest has still not been able to recover completely from the financial crisis and resulting recession that hit in 2008. At the national level, spending increase to more than 25% of GDP in 2010, later in 2011 gross public debt exceeded 100% of GDP. The process of recovery for U.S. economy in the first quarter turned out to be weaker than expected. From January through March, the gross domestic product (GDP) of the nation grew at a 1.8% annual rate. The economy of U.S. has grown for 15 consecutive quarters; however the pace of those gains was about 2% which was actually in the weakest recoveries since World War II. U.S. economy is being held back by its tightening fiscal policy. In this year, the spending cuts are estimated to be $85 billion and expected to grow to $109…
Danielson, A. (1994). The economic surplus. Westport, Conn.: Praeger.
McCarty, Nolan, Keith T. Poole, and Howard Rosenthal (2006). Polarized America: The Dance of Ideology and Unequal Riches. Cambridge, MA: The MIT Press.
Moffatt, M. (1965).The Economic Effect of Tariffs. [online] Retrieved from: http://economics.about.com/cs/taxpolicy/a/tariffs_3.htm [Accessed: 28 Jun 2013].
Ormerod, Paul. (2010). The Current Crisis and the Culpability of Macroeconomic Theory. Twenty-First Century Society.
oth Phillip obbit and Richard Robison offer accounts of what a market-state is. obbit contends that the core features of the market-state are a crisis of the nation-state, a transformation of core state functions, relations of national states to transnational markets, and cosmopolitan culture. Finance is at the center of the culture, the money economy. Governments are more centralized but weaker because power is allocated by the money men, the banks, the managers of finance and capital, and governments are merely their footstools. According to Robison, on the other hand, market-states are neo-liberal, techno-managerial and instrumental, and citizens are clients and consumers. oth describe the materialistic, consumerist society, yet each has its own theoretical approach and unique conceptualization. This paper will compare obbit's and Robison's accounts of market-states and use the writings of Smith, Keynes, Marx and others to help illustrate the nature of the two.
Differences of What…
Bobbit, P (2011) The Shield of Achilles: War, Peace, and the Course of History, NY:
Keynes, JM (1920) The Economic Consequences of the Peace, NY: Harcourt Brace.
Pabst, A (2010) The Crisis of Capitalist Democracy, Telos 152: 44-67.
Discuss some of the motivations firms have for setting up production facilities in other countries. Will the effect on the host country differ depending upon the motivation? Explain. Will the effect on the source country differ depending upon the motivation? Explain. What relationship might trade barriers (or the lack of trade barriers) have in determining a company's primary motivation for producing abroad?
The reasons for the foreign investment are high profit returns, and the rate of return is dependent upon the capital invested, the tax reductions and employees' fund. The foreign investment or production company is highly welcomed by the government because the company is expected to bring in foreign exchange. THz enhances the purchasing power of the country in international currency; thereby the nation has to rely minimum on loans and international borrowing.
The major motivation that the international investor has towards foreign investment is that cheap labor…
Bernstein, J., Gubsky, A., and Yudin, . Under the Roof, The Moscow Times. (1995), section 830.
Fielding, David. (2000). Can olitical Instability Generate Business Cycles? Evidence from the Intrifada. Retrieved 9-23-05 from unknown. Website: http://www.le.ac.uk/economics/research/ReEc/lec/lesson/econ00-9.pdf
Hong, Jung Hwa, Jones, eter, and Song, Haiyan. (1999). olitical Risk and Foreign Investment Decision of International Hotel Companies. Retrieved 9-23-05, from Hotel.Online. Website: http://www.hotel-online.com/Trends/anAmerroceedingsMay99/olRiskInvestHotels.html
Hubbard, Joan C. (1997). Doing Business in Moscow: Threats and Opportunities. Retrieved 9-23-05, from B>Quest. Website: http://www.westga.edu/~bquest/1997/moscow.html
What factors contribute to the fluctuation of exchange rates?
In every currency transaction there are risks due to fluctuations on the realized value of such transfers. Many different factors contribute to the fluctuations of exchange rates. There are economic factors, political factors, and psychological factors to consider. Consumer driven supply and demand plays a part in the fluctuations that take place in the currency market. Another important contributing factor when dealing with foreign…
Political instability is a feature of the general environment and can manifest itself in a variety of ways in business transactions. It differs from political risk, which refers to the possibility that political decisions or events in a country will affect the business climate in such a way that investors will lose money or not make as much money as originally expected. However, an unstable political environment can create, or hint at, possible political risk. This can affect the foreign business world in many different ways. There may be a decline of the stock market and a decline in foreign investment due to fear of political risk. An increase in crime and corruption can upset businesses operating within a foreign country, such as was the case in Moscow. According to studies performed at the beginning of the Yeltsin presidency in 1994, "all retail stores, restaurants, cafes, kiosks, clothing markets, and auto importers, along with seventy to eighty percent of privatized enterprises and commercial banks, were making protection payments to criminal gangs." (Bernstein, et al., 1995) Legal factors affected by political instability in turn affect doing business in foreign countries. Political instability can create different levels of taxation and change zoning laws. How a business is required to be registered may change and the actual operation laws and tax laws themselves may also change. The amount of government support a foreign business receives and the way a foreign business is allowed to advertise can be affected. Also, the privatization of local companies and services may create more competition and ultimately push foreign businesses out of a market. These are all some of the ways that political instability can affect doing business in foreign countries.
3. What are some differences between business and financial risks?
Business and financial risks sometimes overlap, but the two terms define different sets of risks. Financial risk is the possibility that a bond issuee will default, by failing to repay principal in a timely manner. So financial risks deal with the actual risk of a business not being able to recover money lent. Business risk is the risk associated with the unique circumstances of a particular company, as they might affect the price of that company's securities. Unlike financial risks, business risks are not always risks directly associated with a company's monetary assets, even though they can ultimately affect the financial bottom line of a company. Also, business risks will vary depending on the type of business, while financial risks are similar throughout business. Examples of financial risks may be loans or company issued credit lines. An example of a business risk may be a clothing retailer deciding to display a clothing line by an unknown designer.
The depreciating dollar improves the price competitiveness of U.S. exports in the foreign market thus reducing the deficit in the balance of trade. Dollar depreciation has a quicker and stronger impact to the exports than it has to the imports.
The slow effect of depreciating dollar on the trade balance resulted from import volumes increase. The U.S. imports were decreased in response to exchange rates with a dollar depreciating slowing the growth. The rapid shift of trade towards low cost emerging economies continues to corrode U.S. price competitiveness, which would improve the depreciating dollar. The consistence increase in oil prices also acted as a main contributor to the increased depreciation of dollar. This lead to commodity inflation affecting people's lives directly. U.S. enjoyed a period of better economic growth in year 2006 boosting the imports. This helped in increasing the value of the dollar restoring a better economy to the…
The World Economic Forum in its 2010 Global Competitiveness Report ranks the United States as the fourth most competitive economy in the world and the United States has been at or near the top of this ranking since it began in 1979, http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pd
China Daily, October 28, 2010, "China's Twelfth Five-Year Plan signifies a new phase in growth," http://www.chinadaily.com.cn/bizchina/2010-10/27/content_11463985.htm and Martin Feldstein, "The End of China's Surplus, Project Syndicate, January 28, 2011, http://www.project-syndicate.org/commentary/feldstein32/English .
Elgin & David, 2011. Social science an Introduction to the Study of the Society. 14th Edition. Allyn and Bacon Publishers. ISBN-13: 978-0-205-70271-8.