Exchange Rates For Your Clients Case Study

The Balance of Payments in India mainly relies on services exports, remittances and the course capital flows, both foreign direct investments (FDI) and FII. It is very essential that all market participants, such as banks and other intermediaries be provided with the wherewithal so that they can undertake a risk management in a way that is scientific. One of the ways to access domestic, foreign exchange markets is to hedge on the underlying foreign exchange exposures. In addition, the facilities that are available as the booking of forward contracts were included in the domestic forex market in order to evolve and acquire volumes and depth (Sumanth, 2012). Some of the newer hedging instruments have put in place swaps and options in the

dollar to devaluate, which means the deliberate downward adjustment in the exchange rate because it is too high compared to China’s yuan and Germany’s euro. However, the tactics and policies President Trump is trying to introduce are causing it to revaluate or change upward in currency’s value. Investors are still investing in the dollar because they see less translation risk, or the impact of exchange rate changes on a firm’s consolidated financial statements, because Trump’s planned policies have a good chance of increasing the dollar. The high U.S. dollar will cause domestic manufacturing costs to increase causing less product demand from foreign countries. This economic risk, which is the extent to which a firm’s future international earning power is affected by changes in exchange rates, will cause job loss because companies will not be able to pay workers the same with raised

It is known that exchange rates float according to market conditions and that the appreciation or depreciation of a currency that we trade with my have an impact on the eventual revenue obtained so it is important for us to predict what the movements with the currency will look like.

the possibility of a loss because of changes in the value of a foreign currency

Exchange rate as the relative price of 2 countries’ currency, it could have effects on both countries’ exports and imports. Fluctuations in exchange rate would increase the risk of uncertainty for business gain and loss. The appreciation of home country’s currency will lead products of home country are less competitive due to its price is actually higher in foreign country although there is no price increase from home country. And depreciation of home country’s currency will lead home country’s products are more competitive in international market. However, it could increase the possibility of anti-dumping investigations from foreign country against home country.

The exchange rate fluctuations brings great deal of uncertainty on profits and costs, hence such risk damages accounting reports, profitability ratings, credit ratings and in the end can bring down the company. There is no question that exchange rate risk has to be managed, and

The demand for imports should fall as imports become more expensive. However, some imports are essential for production or cannot be made in the country and have an inelastic demand—we end up spending more on these when the exchange rate falls in value. This can cause the balance of payments to worsen in the short run (a

In order to answer the research question, it is imperative to evaluate the economic impact of the current exchange rate regime.

Hedging can be defined as a risk management mechanism or strategy which is used to prevent the chances of incurring losses which arise as a result of fall in prices commodities or currencies. It is a technique which is majorly used by the investors in protecting their capital against the effects of the economic situations such as inflation whereby the investors invests in the high yield financial instruments or take a position to cushion them against such effects (Investopedia, 2012).

When done well, the financial, strategic, and operational benefits of hedging can go beyond merely avoiding financial distress by opening up options to preserve and create value. But done poorly, FX hedging can overwhelm the logic behind it and can actually destroy more value than was originally at risk. Perhaps individual business units hedge opposite sides of the same risk, or managers expend too much effort hedging risks that are immaterial to a company’s health. Managers can also underestimate the full costs of hedging or overlook natural hedges, instead applying costly financial ones. Nevertheless, a few simple pointers can help avoid problems and make hedging strategies more effective.

Exchange rates are the important tools in the global economy. The exchange rate activity will affect the price of every country’s imports and exports, as well as the value of every overseas investment. A weak currency makes exports cheaper to foreigners, which can lead to higher exports and job creation in the export sector. Consumers use exchange rates to calculate the cost of goods produced in other countries. How much a currency is worth in relation to another currency is determined by the supply and demand for currencies in the foreign exchange market. Following the global financial crisis of 2008-2009, tensions among countries over exchange rate policies arguably broadened. Some policymakers and analysts have expressed

1. Fluctuation in exchange rates: Exchange rates of currencies of different countries fluctuate continuously and in a very random manner with the change in the demand and supply state of the concerned currency. That can translate the profit from the international business transaction into a loss or vice-versa. Thus, the exporters dealing with foreign receivables should be conservative to avoid this risk.

Those organizations wishing to engage in international business transactions have many elements they must consider. One of these elements is that of foreign exchange rates, the rate at which one currency can be converted into another (Hill, 2014, p. 296). While a company may be located in the United States, they may engage in commerce with organizations in foreign markets that require payment in their domestic currencies. Organizations must pay careful attention to these exchange rates, as their fluctuations can significantly impact the costs of doing international business, as demonstrated in the first section. While exchange rates are determined by the supply and demand of currencies on the foreign exchange market

The aim of this essay is to understand the problem of exchange rate. In order to answer to this problematic, various topics will be

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.