... Why does a fall in the value of the Australian dollar against the U.S. dollar benefit Billabong? As a result, Billabong’s fortunes are closely linked to the value of the Australian dollar against the U.S. dollar. When the Australian dollar falls against the U.S. dollar, Billabong’s products become less expensive in U.S. dollars, and this can drive sales forward. Australian dollar fell rapidly in value against the U.S. dollar. In June 2008, one Australian dollar was worth $0.97. By October 2008, it was worth only $0.60. The fall in the value of the Australian dollar was in part due to a fear among currency traders that as the world slipped into a recession, caused by the 2008–2009 global financial crisis, global demand for many of the raw materials produced in Australia would decline, exports would slump, and Australia’s trade balance would deteriorate. 2....
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...United States. The American and Canadian dollars are always changing, and the company is faced with the difficult decision of how they will react to the constant change in currency exchange rates. Pixonix is very susceptible to failure and losses as a result of this fluctuating exchange rate. This is known as the foreign exchange risk. At present, the Canadian dollar is valued above the US. dollar, but if the Canadian dollar dips, it could have a unfavorable fiscal outcome for Pixonix when it comes time to purchasing new tools and software in US dollars. On the other side of this, if the Canadian dollar continues to rise above the US dollar, Pixonix may have trouble selling their products to US consumers. There are a number of ways that Pixonix can insure against the foreign exchange risk, but Cain has no previous experience in these strategies. Analysis of Problems The exchange rate fluctuation is a concern for any Canadian company because the US market also drives the Canadian market. That being said, Pixonix is affected by the exchange rate fluctuation specifically because it licensed tools and software for an annual cost of $7.5 US. This is a significantly different number in Canadian dollars if the exchange rate of $1 Canadian is worth $1.0717US. Cain is concerned about the fluctuating Canadian dollar because she needs to convert Canadian dollars to US dollars to pay for the tools and software she licensed. The Canadian dollar is at a great rate for Pixonix right now...
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...INTRODUCTIONS Euro unabated until today, no progress while the output lead to a worsening of the US economy, while the European Union's economy has created and continues to create the effect of a bomb. Slowed manufacturing due so in the United States and the decline in so born producer inflation, while increasing concerns for a slowdown in the economic recovery, the depreciation of the dollar with getirmiştir.amerik United States as they begin to worry about the growth of the economy in concern gösterilebilir.b as a result of this kind of data the euro the upward movement rising against the dollar has led to the stop. Seeing this, the evaluation noted that the US Federal Reserve released the latest growth forecast for this year has attracted a number of qualifications in the guide below. Central America describes as a positive trajectory in the branches of the Bank has made the euro-zone has caused the appreciation of the euro on positive news. Held in Greece this year, forecast to draw a positive picture of Portugal and Spain's successful bond auction and stress tests for banks were the main factors in the formation of the air. So what else can affect the euro-dollar parity and this factor may be what? There are four main factors. The first of these, the euro determines the movement against the dollar. Continuous decisive subjects, which is the euro. This is the main factor determining the second factor, the United States and European nations have applied their central banks...
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...Analysis of the Recent Economic Downturn In 2007, strong growth in the third quarter lead most to believe that a recession had been avoided, however, this proved not to be the case. A decline in GDP growth is the cause of recessions. Typically, there will be a “goldilocks” economy or an irrational exuberance prior to a recession, followed by a market crash. Prior to the 2007 – 2009 recession, the housing market was going up. Everyone “knew” house values could only go up and behaved accordingly; banks lent too much money to consumers bought too much house. Once the market crashed, the stage was set for a recession. Many factors affecting the aggregate demand curve had declines. As mentioned, home equity declined, as well as the stock market. This decrease in wealth decreased consumption and consumer confidence leading to lower spending. As consumers cut back on spending, business confidence also fell with additional decreases in consumption and also investments. Additionally, foreign GDPs were also declining leading to a decrease in exports. The changes in these variables all caused a shift back in the aggregate demand curve, lowering the GDP. Attempting to counteract the recession, the Federal Reserve pumped money into the economy, increasing the nominal money supply. As the value of the dollar decreased, interest rates were kept low, allowing the exchange rate to remain favorable for exports. Additionally the government increased spending by way of stimulus packages for banks...
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...affects all American companies operating internationally. In the recent years, the US Dollar has been under a systematic assault resulting in a decline in its value across the major world currencies. “This assault has included vocal countries, China for example, in demanding that the US Dollar be removed as the standard international currency” (Batson, 2009, pg.1). The foreign exchange rate of a currency is a general measurement of the financial health of a country, though the rates of exchange are not tied specifically to financial measurements. Therefore, a stronger dollar will benefit Americans more than a weaker dollar. One of the blessings in disguise maybe the value of the trade deficits that US has with a foreign country like China, it may decrease because Americans are not able to purchase more of the imported goods as their costs increase. The decline in the dollar’s value has benefited some American companies. US companies that export to places where the dollar is declining has seen an increase in their bottom line. “Foreigners buying US products in their own currency are able to buy more products as the US products are cheaper” (Salvatore, 2007, p. 346). The downfall of a drop in the dollar versus foreign currencies is the affects that the depreciation has upon US importers and Americans traveling abroad. For US importers, the cost of goods increases because it takes more dollars to buy the same product. In addition, for Americans living or traveling abroad all of...
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...Background The value of the Jamaican dollar as of mid-2009 climbed to J$89 to the US dollar and settled in that zone for some time before making some gains, returning to J$85 mark in 2010. Currently, the Jamaican dollar is at $121.61 and has been in a declining state since it appreciated in 2009. The primary costs of the falling dollar are higher prices for imported goods and for Jamaicans traveling abroad. On the other hand, the benefit of a weaker domestic currency makes imports more expensive, but this could act as a barrier against imports, thus improving the country's trade balance. Domestic-currency depreciation helps attract more foreign domestic investment. This is so because international companies would find it more attractive to establish businesses in Jamaica (Seaga, 2014). The primary benefit therefore, is increased price competitiveness of Jamaican products, both for exports abroad as well as in the domestic market. The country currently has an enormous trade deficit (importing more than it exports), which represents a significant drag on efforts to spur economic growth and create jobs, and has led to an accumulation of foreign debt that will have to be repaid in the future. Given this trade deficit, the benefits of greater international competitiveness prompted by the falling dollar greatly outweigh the costs. This dollar decline was due to the Government’s decision on October 23, 1983 to devalue the Jamaican dollar to J$3.15 to the US dollar. The local currency...
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...economies and the rise in the value of Yen hurt Sony's exports from Japan ? The strong rise in the value of Yen and the contraction of US economy resulted in a sharp drop in exports from Japan. The decline in exports was primarily due to a lower demand for consumer electronic products in US due to the slowing US economy, as well as the strong rise in the value of Yen relative to US dollars or Euros making the exports more expensive or less affordable for foreign countries. As exporters saw their sales and profits declining, they started cutting operating costs and slashing orders from their suppliers thus creating a ripple effect in the Japanese economy affecting both production and employment. These events and deflation caused a sharp contraction in the Japanese economy where consumers were delaying purchases in hopes that prices would continue to fall. Sony as well as other local companies were hesitant to invest more in technology and or R&D due to these uncertain conditions thus making their exports less competitive relative to competiton. 2. In what other ways has the strong yen affected Sony's bottom line ? What would be effect of a weak Yen? Exchange rate fluctuations affect Sony’s operating profitability because many of Sony’s products are sold in countries other than the ones in which they were manufactured. The strong appreciation of Yen created a negative impact on Sony's financial results as exports were invoiced in dollars to customers worldwide and production...
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...How will this affect us? Many wonder what the future is for the global economy. Over the last few years economists have been expressing increasing concerns about the direction the global economy is going in, and the possibility of a worldwide depression. They have been warning about the growing global imbalances in the world economy, and the consequences if not corrected. Yet we live in a time where the global economy is booming, especially in the Anglo-Saxon and Asian economies. Consumer spending is up. House prices around the world have risen dramatically. Unemployment remains low. The global economy has experienced the longest period of sustained economic growth in recent history. The US$ continues to remain stable. Why has the global economy experienced such strong growth? Will this growth continue? What does the future hold? Interestingly, some of the stimulus for the growth the global economy has recently experienced is a result of decisions made following Sept 11th. Already, prior to Sept 11th the US Federal Reserve was maintaining a loose fiscal policy in an effort to stimulate economic growth in the US economy, which had slowed down following years of strong growth during the Clinton administration. Then along came Sept 11th, which threatened to destabilize the American banking system. To prevent this happening, the Fed injected billions into the banking system to provide sufficient liquidity to prevent a run on the dollar and the banks. Meanwhile...
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...Daniel Bibonge Amsini Econ 412 December 18th, 2014 The US and its Current Account Deficit America's current account deficit has been fluctuating over the past 20 years. From 1991 it rose to a record high of about 6% of GDP in 2006 and it began to fall a year later to finally reach a level of 3% of GDP in 20091. Capital inflows finance the current account deficit. Economists are wondering if such large inflows are sustainable. According to economic theory, a current account deficit is not necessarily harmful as it stimulates a period of inward investment that can actually boost a country’s employment and investments. The current account deficit is still considered too large even at 3% and there is fear that it is caused by the recession. However economists believe that the US current account deficit may actually contribute to its development and attract foreign investors. The current account deficit is actually a good arsenal for the development of a country. For example, Japan invested a lot in the UK and this caused the emergence of new jobs in addition to the increased investment. The following paragraphs will enlighten more about how the current account of the US can affect its economy. 1 Feenstra, Robert C., and Alan M. Taylor. "National and International Account." International Macroeconomics. New York: Worth, 2012. 172-77. Print. A current account deficit (CAD) occurs when a country has an excess of one or more of the four factors (goods, services...
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...Secretary, ICAI, New Delhi) Introduction Depreciation refers to a fall in the value of the domestic currency which is caused by the demand for foreign currency exceeding its supply in the market. In such a situation one has to pay more than before to get units of foreign currency. This fall takes place in the market and on its own. Market determined exchange rate serves the purpose of aligning the domestic economy with the world economy was the price route. As consequences the domestic price gets linked up with those of the world price. With the liberalizations and globalization of the economy in recent years, imports are bound to increase. The lessening of restrictions on imports and lowering of tariff on imports which the economic reform implies, an increase in imports has in fact taken place. Again with trade having become an important element of the new strategy of growth. India got freedom from British rule on Aug 15, 1947. At that time the Indian rupee was linked to the British pound and its value was at par with the American dollar. There was no foreign borrowing on India's balance sheet. To finance welfare and development activities, especially with the introduction of the Five-Year Plan in 1951, the government started external borrowings. This required the devaluation of the rupee.- After independence, Indian choose to adopt a fixed rate currency regime. The rupee was pegged at 4.79 against a dollar between 1948 and 1966. India faced a serious balance of payment crisis in...
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...Eco550 Week 3 Chapter 5 1. The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned ride snowmobiles. The model specifies that the S vary jointly with disposable personal income Y and the population between ages 15 and 40,Z, and inversely with the price of the snowmobiles P. Based on the past data, the best estimate of this relationship is S= K *YZ/P where k has been estimated (with the pst data) to equal 100. If Y=$11,000, Z= $1,200, and P=$20,000 a) what value would you predict for S? Answer: The given function is S=K*YZ/P at the given values of; k=100 Y=$11,000 Z=$1,200 P=$20,000 the value of S is: S=100(11000*1200)/20000= $66,000 so there would be a sales of $66,000 at above given values. 5. A firm experienced the demand shown in the following table. a. Fill in the table by preparing forecasts based on a five-year moving average, a three-year moving average, and exponential smoothing (with a w = 0.9 and a w = 0.3). The exponential smoothing forecasts may be begun by assuming Ŷt+1 = Yt. b. Using the forecasts from 2005 through 2009, compare the accuracy of each of the forecasting methods based on the RMSE criterion. c. Which forecast would you have used for 2010? Why? 5- year 3-Year Exponential Exponential Actual Moving Moving Smoothing Smoothing Year Demand Average Acverage (W= 0.9 ) (W= 0.3 ) 2000 800 xxxx xxxx xxxx Xxxx 2001 925 xxxx xxxx 687.5 762.5 2002 900 xxxx Xxxx...
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...this work covered by copyright may be reproduced or copied in any form or by any means (graphic, electronic or mechanical) without the written permission of the publisher. ISBN 978-1-921768-44-6 2 Ai Group National CEO Survey 2013 Business prospects in 2013 Australian Industry Group National CEO Survey Business prospects in 2013: Australia's gap year? Ai Group National CEO Survey 2013 Business prospects in 2013 3 Key messages Business prospects in 2013: Australia's gap year? The Australian economy is going through significant change, with multiple, long-term forces restructuring our economy (such as global growth shifts and our own demographic changes), and ongoing challenges in our immediate outlook (such as the high Australian dollar and our relatively high business cost base). Recent drivers of growth are waning, with capital investment by the mining industry due to peak soon and federal and state government investment already past its post-GFC peak. But other potential growth drivers – most notably commercial and residential investment – are yet to show signs of a meaningful pickup. The global outlook also remains challenging, with only Asia generating any real growth in demand. As a result, in 2013, we are likely to see a gap in Australia’s economic momentum....
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...First Name Surname Instructor Course Date Economics 1. The value of the US dollar is currently at very high levels in historical contexts vis-à-vis other currencies. When the value of dollar increases, how is it supposed to affect the US exports and imports? What effect could we have on international trade balances, domestic employment, and GDP? Looking first at the export, on 1 July, one euro traded for $1.37 yet on 13 October, one euro could only get $1.27, which is about 8.5% less. It means a lot to the U.S exporters. Assume that a good or a service that the American exporter produces costs $1.37 per unit. On 1 July, one could purchase the good or the service with one euro yet on 13 October, one euro could not sufficiently buy the good or the service. About 8.5%, more of the euro will be required for the purchase. When the value of the dollar is stronger, the goods of the US become more expensive to the foreigners. It hurts the exporters and those employed in the industries of the exports. The opposite is true when it comes to the imports that get into US. As the exports become very expensive for the foreigners due to the strengthening of the dollars, the goods imported into America become cheaper. Thus, as the dollar becomes stronger against other currencies. The economists of the imports and the exports on US summarize the overall impact through the measure known as “net exports,” which is the difference between the exports and the imports. The idea portrayed in...
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...HBS Project: Blackstone and the Sale of Citigroup’s Loan Portfolio Blackstone and The Sale of Citigroup’s Loan Portfolio In the second half of 2007, the banking industry and financial market showed signs of considerable stress by raising the default rate of mortgage and the decline in the value of residential mortgage-backed securities. This had led to a re-pricing of many debt instruments. By the end of 2007, Citigroup declared that the fair value of its U.S. sub-prime related direct exposure could decline by 20%. This affected Citigroup’s financial results and would incur further losses in the future. One of Citigroup’s main concerns was the risk of their exposure from holding leveraged loans. Due to the increasing risks and costs associated with holding these loans, Citigroup approached several large investors, including a private equity firm and a hedge fund, about purchasing leveraged loans from their portfolio. Blackstone expressed interest in a portfolio that contained a total face value of $6.11 billion, with16 different issuers. Blackstone, one of the world largest private equity firms, was reviewing materials for their potential purchase of a $6.11 billion pool of leveraged loans from Citigroup, one of the world’s largest banking entities. Most of these loans were used to finance large leveraged buyouts (LBOs). Citigroup would help the transaction by offering debt financing for the purchase of the loam, while Blackstone would offer the rest of the fund and...
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...mortgage • Arbitrage drove the yields on all bonds & loans down • Expansion of consumer credit, housing price bubble Intriduction continued • Unsustainability of Credit default swap and subprime mortgages exposed • Housing bubble burst → mortgage default → foreclosures→ bank and insurance failure→ credit freeze • Spillover of financial crisis to real economy through virulent credit crunch →depressed aggregate demand • Sub prime mortgage default led to spillover effects around the world (Europe and emerging economies) via an elaborate network of derivatives Continued . Global consequence of the crisis includes: • Sharp rise in Unemployment in the US, Job loss in few other countries • Sharp fall in the stock market price around the globe, current stock prices are unable to explain the value of the companies • Panic also spread around to reduce property prices in some other countries • Extra caution in lending even with excess liquidity, depressed consumer demand II. Global Recession and Low Income Countries • Channels - Although some countries with sufficient foreign equity capital experienced capital flight, spillover...
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