scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 1,606
The foreign exchange market is one of the most important financial markets It affects the relative price of goods between countries and so can affect trade It means that it affects the price of imports and so affects a countrys price level inflation rate It also affects the international investment and financing decision In this project we will try to find why exchange rate would give many risks to a company and how a company can hedge itselfThe price of one currency expressed in terms of another currency is called an exchange rate With the price it is normal to quote them as the price for one unit of the good The price of a jacket is how much you have to pay to get 1 jacket The price of a car is how much you pay to get 1 car The exchange rate between AUS and US from AUSs point of view is how many AUS dollars you have to pay to get 1 US dollar Since you have to pay about AUS155 to get 1 US dollar the exchange rate between AUS and US is 155 In this case the US dollar is the commodity currency and the AUS dollar is the terms currencyWe denote this SAUSUS155 If a currency appreciates it becomes worth more and so you need less of it to buy one unit of another currency This makes imports cheaper For example if the AUS dollar appreciates then SAUSUS will fall from 155 On the other hand If a currency depreciates it becomes worth less and so you need more of it to buy one unit of another currency This makes imports more expensive For example if the AUS dollar appreciates then SAUSUS will rise from 155Why does FX give risks to a companyEvery daily exchange rate is changing over time It might fluctuate slightly or go up and go down sharply On the diagram1 is the daily exchange rate
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA