...Make a list of factors that you believe influence or determine foreign exchange rates (i.e., factors that you may want to monitor as an corporate international finance manager). Rank these factors from most important (1) to least or less important. (1/2 to maximum 1 page). Political Stability Inflation Interest Rates Speculations Strength of other currencies Current-Account Deficits Public Dept Terms of Trade Government Intervention Economic Performance Imports Exports unforseeable incidents (like natural disasters, gunshooting, terorrism) Central Bank Actions For the factor you ranked as number 1, write a brief statement as to why you selected it and why you think that factor is the most important in determining foreign exchange rates. (maximum ½ page). From my point of view, political stability is one of the most, not to say the most important factor that influences foreign exchange rates. Because, if there is no political stability in a country, the economic performance is not stable, too. Also consumer spending declines or is weak and trading sentiments for its currency turns sour, leading to a decline in that country's currency against other currencies with stronger economies. So to say, a country with political stability will also have most likely a stable and/or strong currency. We saw that in history many times, that political instability also lead to big changes in foreign exchange rates and also could...
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