Exchange Rate and Trade Balance

Trade policy and the balance of payments. The dollar is similar to other currencies. “Economic conditions worldwide all influence the trade balance but are extremely difficult to control.” (Bianco, Canon 2011, p 584) There are trade deficits, which include exchange rates, consumer tastes, and labor costs. Sometimes these deficits make it hard to control trade

a) A fall in the value of the Australian dollar (AUD) against the U.S. dollar (USD) benefit Billabong in two folds, strengthened price competitiveness and translation advantage. Firstly, the Americas segment accounts for about 50% of Billabong’s sales revenue in 2008 and 2009. (Appx.1) In case of depreciation of AUD against USD, the price of imported surfwear to the U.S. in terms of USD will decrease. The US importers demand more for Billabong’s products. The sales increases from the strengthened price competitiveness. Secondly, when Billabong received payment from the importers, it will translated back into AUD for use in Australia. As AUD depreciate, the receipt in USD can be translated into more AUD than before, bringing

Before we look at these forces, we should sketch out how exchange rate movements affect a nation 's trading relationships with other nations. A higher currency makes a country 's exports more expensive and imports cheaper in foreign markets; a lower currency makes a country 's exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country 's balance of trade, while a lower exchange rate would increase it.

The global financial crisis has affected severely on Vietnamese exports. After joining the WTO, Vietnam’s trade has become depend on global

3) Purchasing power parity and the exchange rate in the long run (how exchange rate is

Hint : When there is a change in the exchange rate, this would automatically alter the prices of all foreign goods to domestic goods, as the domestic prices are intertwined with the foreign prices. Thus, these changes would affect the trade flows between nations.

Exchange rates play a pivotal role in the relationships between individual economies and the global economy. Almost all financial flows are processed through the exchange rate, as a result the movements and fluctuations of the exchange have a significant impact on international competitiveness, trade flows, investment decisions and many other factors within the economy. Due to the increasing globalisation of the world economy, trade and financial flows are becoming more accessible

This paper aims to compare the Japanese Yen against the US Dollar over a five year period starting from 2005 till 2010. The exchange traded fund for Japanese Yen shall also be discussed in the paper and afterwards an analysis of both the currencies shall be presented. There are different factors that influence the exchange rate differences between any two chosen currencies. The effects produced by these different exchange rates can be of quite different intensity. The most common elements that have an impact on exchange rate difference include economic factors, socio political factors and other behavioral or technical factors also. The macroeconomic factors such as growth of a country, employment rate, gross domestic product etc. All

1. What are the implications of China’s exchange rate policy on doing business with and “against” China?

Stanek, M. B. (2002). A review of exchange rate policies and their effect upon nations and

Such a process can be very time consuming and imprecise, without, of course, having a market currency price to begin with. The exchange-rate system is an important topic in international economic policy. Policymakers and journalists often seem to treat the choice of exchange-rate system as one of the most important economic policy choices that a national government makes, on a par with free international trade. Under most circumstances and for most countries, a system of freely floating exchange rates is likely to be a better choice than attempting to peg the exchange rate.

Finally given the slowing economy in Asia the International Monetary Fund (IMF) has reclassified the yuan. Previously the IMF considered it to be “substantially undervalued” compared to other currencies. The IMF has softened its tone toward the Chinese yuan and it is now considered “moderately undervalued”. This new designation makes it harder for the United States government to make a case against and therefore policies to target the imports based on the Chinese yuan. (Davis, 2012)

The appreciation of the RMB issue has attracted attention of various circles at home and abroad. By analyzing the current RMB exchange rate appreciation on China’s economic impact at all levels, I will mainly from the industrial structure, export structure, and enterprises to change their operational mechanism, to ease trade tensions and the effectiveness of monetary policy five-pronged approach to analysis; and my final conclusion: RMB exchange-rate appreciation generated by the final result is more positive than negative, impact is positive. In the current context of the appreciation has become a fact, china should actively take the appropriate follow-up measures to stabilize and optimize the economic environment, to minimize possible

In recent years, China’s balance of payments always keeps “double favorable balance”. In 2005, China’s national economy developed quickly and stably. The exchange rat of RMB became more flexible. The current account surplus increased obviously and the capital account surplus decreased. The foreign exchange reserve still increased quickly. In 2005, Chinese government did some fiscal policy and monetary policy. Such as decreased government expense, raise the tax rate, used managed floating system, improve the foreign exchange management, enlarged the foreign exchange market. We can conclude that china’s BOP will still keep “double favorable balance” and keep

Exchange rate represents the external value of a currency. Changes in exchange rates may affect the relative position of a country in the international trade. Politicians and economists concern about exchange rate variability for lots of reasons, among which that the exchange rate variability discourages trade comes first. However, a large empirical literature on this issue does not confirm a significant effect of exchange rate on the volume of trade [1]. Instead other variables such as employment should be much more important from a practical point of view, for it is closely related to people’s livelihood.