BUS4016, Unit 6 Assignment 2, Currency Exchange Risks

[u06a2] Unit 6 Assignment 2 Currency Exchange Risks Resources Currency Exchange Risks Scoring Guide (see attached). Read the “Embraer and the Wild Rise of the Brazilian Real” case study on pages 285–286 of your textbook. (see above link about accessing the book: “Global Business Today”, via the Bookshelf link)…. or use internet to find this info….. Based on your overall readings for this unit, identify a strategy that Embraer might consider, in order to reduce its currency exchange risk associated with the Brazilian and U.S. currencies. Include the following in your paper: Identify the exchange rate of the Brazilian real and the U.S. dollar. Discuss the resulting value of selling goods in the United States exported from Brazil. Identify how weekly changes in the exchange rate would affect profitability for exports from Brazil to the United States. Identify risks related to changes in exchange rate from a management perspective. Use the following guidelines when writing your essay: Length: 275 words. Writing: For full credit, your essay must be free of grammar and spelling errors, demonstrating strong written.

The supply and demand of products in the US influences the change in prices of the products due to the difference experienced in the value of the currency with the exporting nations. The foreign exchange rates offer information on the number of American dollars it costs to obtain a unit of the foreign currency. From this perspective, the floating foreign exchange rate varies daily due to the influence of the demand and supply for the currency in the international level. There are various factors that influence the differences in the value of currencies and this is translated to variations in prices when goods are imported (Li, Zhu, & Li, 2016). Subsequently, a business stands a chance to profit or lose based on the business strategies employed. For instance, the exchange rate for the Japanese Yen to that of the Dollar standards at about 109.20 Yen to $1. Suggestively, the dollar has a higher value than the Yen. Resultantly, if the domestic income increases, there is increased demand for imports. If the inflation rates in Japan are higher compared to those of US, there will be an increase in the demand for imports and business can earn more profits due to the high value offered in the exchange rates.

The weekly changes in the exchange rate can affect the profitability of a company due to the value of the currency changes influencing the price. For instance, a toy bought for 109.20 yen would be traded for one dollar. Inflation in the US or other factors can reduce the value of the dollar, increasing the amount used to purchase foreign currency. Subsequently, the importing company could experience losses. The toy bought for 109.20 Yen would trade at a lower price than the initial price depending on the time. The foreign exchange risks are experienced due to the changes in the currency exchange rates. The economic exposure lead to currency rate fluctuations that affect the firm’s position compared to competitors (Gopinath, Itskhoki, & Rigobon, 2010). Nevertheless, the currency exchange rates can have good effects on the firm…

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