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Currency Exchange Rates Paddington | Monex International UK

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Currency Exchange Rates Paddington | Monex International UK

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  1. Currency Exchange Risk

  2. Currency Risk Currency Risk : Investors or companies that have assets or business operations across national borders are exposed to currency risk that may create unpredictable profits and losses.

  3. Exchange Rate In an indirect quotation, the price of a unit of domestic currency is expressed in terms of the foreign currency. In a direct quotation, the price of a unit of foreign currency is expressed in terms of the domestic currency. Thus, an exchange rate has two components, the domestic currency and a foreign currency, and can be quoted either directly or indirectly. However, exchange rates can also be quoted against another nations currency, which are known as a cross currency, or cross rate. An exchange rate is the price of a nation’s currency in terms of another currency.

  4. Exchange Risk This also refers to the risk an investor faces when he needs to close out a long or short position in a foreign currency at a loss, due to an adverse movement in exchange rates. Foreign exchange risk - also called FX risk, currency risk, or exchange rate risk - is the financial risk of an investment's value changing due to the changes in currency exchange rates.

  5. Global Marketers Dilemma For example, a choice between debt (which has to be paid back with interest and on schedule, but which generally does not affect owners' control of the business) and equity (which does not have to be paid back but may result in dilution or loss of control to outsiders).

  6. The Categories Of FX Rate Risk Transaction Risk Economic Risk Translation Risk Contingent Risk

  7. What is the Foreign Exchange Market Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.

  8. What Determines Exchange Rate Levels If a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand. Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world

  9. How Do International Marketers ManageExchange Risk? Risk Shifting (Short Term) : Immediate currency conversion is a spot transaction conversion in the future uses a forward exchange contract, a bank agrees to fix an exchange rate at a set date in the future, thus giving the exporter certainty in their exchange rate. Risk Modifying (Long Term, Strategic): Involves marketer manipulating prices or other elements of their marketing strategy. Export prices may be adjusted or not depending on market conditions.

  10. Strategic Risk Modifying Behavior by theInternational Marketer Short-term: Considerations is market price-sensitive?, Local competitors’ reactions, value placed on price stability, alternatives to discounts. Long-term: Market refocus Streamline operations/seek efficiencies Shift production

  11. Thank You …

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