Assignment 2 Discussion Question Using Internet Resources
Assignment 2 Discussion Questionusing Internet Resources Find The Exc
Assignment 2: Discussion Question Using internet resources find the exchange rates between the United States and two (2) other foreign countries of your choice. Assume you own and operate a manufacturing company in one of the foreign countries selected and purchased material from another of the selected countries and then sold your finished product to companies in the third country. Discuss the impact of those exchange rates upon imports and exports among the three countries. Your work should be 3-5 paragraphs long.
Paper For Above instruction
The intricate dynamics of international trade are heavily influenced by fluctuating currency exchange rates, which directly impact the competitiveness of exports and imports among countries. For this discussion, I have selected the United States, China, and Germany to analyze how exchange rate movements affect trade flows among these nations. As a manufacturer based in Germany, purchasing raw materials from China and selling finished products in the United States, understanding the interplay of currency values is vital for strategic decision-making and financial planning.
The current exchange rate between the US dollar (USD) and Chinese yuan (CNY) is approximately 6.8 CNY per 1 USD (XE, 2023). Meanwhile, the euro (EUR), the currency of Germany, is valued at about 1.09 USD per EUR (European Central Bank, 2023). These rates have notable implications for trade. A weaker USD relative to the CNY makes Chinese imports cheaper for the German manufacturer, reducing procurement costs. Conversely, a stronger EUR vis-à-vis the USD means that when the manufacturer sells finished goods to Americans, their products are more expensive in the US, potentially reducing sales volume or forcing price adjustments to remain competitive.
From the perspective of import and export impacts, if the USD depreciates against the CNY, Chinese raw materials become cheaper for German companies, fostering increased imports of raw materials. Simultaneously, a stronger EUR relative to the USD makes German exports more expensive for American consumers, potentially decreasing demand for German-made products. The differential movement of these currencies can thus create a competitive disadvantage in the US market but can benefit German exporters if the EUR depreciates against the USD. These currency fluctuations necessitate strategic hedging and pricing strategies to mitigate potential adverse effects while capitalizing on favorable movements.
In conclusion, exchange rates profoundly influence international trade by affecting the cost structure, pricing, and competitiveness of goods and services across borders. For a manufacturing company operating between Germany, China, and the United States, monitoring these fluctuations is crucial for optimizing profitability and maintaining competitiveness. Proactive currency risk management strategies, such as hedging and adjusting pricing policies, become essential tools to navigate the complex landscape shaped by volatile exchange rates.
References
European Central Bank. (2023). Euro foreign exchange reference rates. https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/index.en.html
XE. (2023). USD to CNY exchange rate. https://www.xe.com/currencycharts/?from=USD&to=CNY
U.S. Federal Reserve. (2023). Foreign exchange rates. https://static.federalreserve.gov/releases/h10/current/
Bank of China. (2023). RMB exchange rates. http://www.pbc.gov.cn/english/130721/131722/index.html
German Federal Ministry of Finance. (2023). International trade statistics and reports. https://www.bundesfinanzministerium.de/Web/EN/Home/home.html
International Monetary Fund. (2023). Currency exchange rates. https://www.imf.org/en/Markets/Currencies
World Bank. (2023). Data on exchange rates and trade. https://data.worldbank.org/indicator/PA.NUS.FCRF
Trading Economics. (2023). USD/EUR, USD/CNY exchange rate data. https://tradingeconomics.com/
Bloomberg. (2023). Foreign exchange market insights. https://www.bloomberg.com/markets/currencies
Statista. (2023). International trade and currency exchange statistics. https://www.statista.com/