About 'best exchange rates'|Todays foreign currency exchange rates, 14/12/10 best Exchange rates
Nearly everyone who wants to become involved in business has lofty goals and, often times, international expansion is one of them. In order to assure a company does so in an effectual manner all areas of business must be explored. Much emphasis is placed on mode of entry, regional characteristics, and import and export issues but often, currency issues are forgotten about. It is imperative that you, as an up-and-coming business person, understand currency exchange rates and factors that affect them in order to help yourself, or your company, remain profitable. Exchange rates are reflective of a nation's currency in units of a different legal tender or commodity (Moffett, Stonehill, & Eiteman, 2006). Understanding the value of foreign currency and the dynamics that enter into the increase and decreases in value is key knowledge that will serve expansion plans favorable manner. There are several factors that have an effect on monetary exchange rates. Issues such as a slowdown in Gross Domestic Product (GDP) growth, relative prices in regard to goods used for trade, and liquidity are a few. Contributing to slowdowns in growth of the GDP are lackluster manufacturing areas and sluggish agricultural regions. Each of these has a direct bearing on trade, which also influences domestic growth. Agriculture is probably more important than many realize since nearly everyone has a reliance on that area for sustenance even though it only comprises roughly 20% of the GDP. Manufacturing has been compromised due to the auto industry troubles during the economic downturn. One of the foremost liquid economic markets in the world is the foreign exchange. Liquidity refers to an asset's capacity to be effortlessly changed by way of making purchases or selling without triggering a substantial change in price and with smallest possible damage to overall worth. In the international overseas exchange and interrelated markets, the volume that is exchanged on a daily basis is recurrently increasing. Every day yields were said to be in excess of US$3.2 trillion in April 2007 by the Bank for International Settlements (Bank for International Investment, 2007). As long as liquidity is adequately resilient enough to maintain to import payments then the exchange rates typically hang about a steady level. The laws of supply and demand in the foreign exchange market play a key role in monetary values. Augmentation of and declines in trade and money are significant factors in exchange rates and eh ups and downs associated with it. Most capitalistic countries operate under a floating system of exchange rates which mean that the market fluctuates without interference from the government. When government begins to get involved with private business, as in socialistic societies, the market bounces all around and it is difficult to determine what will happen to the monetary aspect of the region. One of the advantages however, is the government's capacity to amend interest rates as a result of market activity. The goal is normally to stabilize a volatile economy. The United States is a current example of a volatile financial system. In conclusion, there are numerous factors that come into play with exchange rates. The stronger an economy is the better off their monetary stability remains. As a business looks to expand into the international business community it is in your, and the company's interest to examine the financial market of any target region. Failure to do so could spell the decline of your organization and create more problems in an already unstable economy. References Bank for International Investment, (2007, December). Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2007. Retrieved August 21, 2009, from Bank for International Settlements Web site: http://www.bis.org/publ/rpfxf07t.pdf Moffett, M., Stonehill, A., & Eiteman, D. (2006). Multinational Finance. New York: Pearson. |
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