Currency For Each Countries Have Depreciated Essay

Question:

Discuss About The Currency For Each Countries Have Depreciated?

Answer:

Reason for the change

The one common factor for all the above-mentioned countries is the fact that the currency for each of the countries have depreciated. There are three reasons because of which a country devalues their currency and they are boosting of exports, shrinkage of trade deficits and reducing of the sovereign burdens of debt (De Grauwe 2016). When the currency of a country is devalued the cost of exports decreases for the foreign country which enables the host country to become more competitive in the market. the demand for the export goods for the country increases which provides them with competitive advantage in the market. When the demand increases the price of the products increases and eventually it normalizes the effect of the devaluation of the currency (Bergsten and Halm 2015). When the export of a country increases the import decrease which helps in the improvement of the balance of payment which in turn shrinks the trade deficit. The deficit in trade for a country will affect the economy so time to time devaluation of the currency helps in reducing of the deficit and thus boosts the economy of the country (Edwards 2015). When the currency of a country becomes weaker it helps to reduce the cost of the payments of the debts in the long run. The currency devaluation will help to reduce the cost of the interest payable in debt.

Implications of international marketing in changing exchange rates

The companies who are having products or services in the overseas market are susceptible to the changes in the currency rates. A minute change in the currency rate could cause a huge loss for a company (Gabaix. and Maggiori 2015). Thus, the multinational companies hire people to monitor the daily changes in the exchange rates which makes sure that the company can mitigate the risk of losing money in the foreign market. The companies should be aware of the effect of the currency rates on the local currency and should follow market trends on a regular basis to identify the patterns (Cavusgil et al. 2014). The company should be aware of the effects of the changes in the exchange rates and should be able to use for the welfare of the company. This will also help the company to identify the right time for investments and purchase in the foreign market. The usage of forward contracts to lock the rates so that the company can use it later on is a must. The business organizations which are very much dependent on foreign trade will make profits if they are bale utilize the forward contracts efficiently (Chkili and Nguyen 2014.). The derivate market can be used by any company for their own benefit but this only possible if they have appropriate knowledge about the market and they are able to follow the trends on a regular basis.

Conclusion

Thus, it can be concluded from the above tables and market trends that the tendency to devalue their own currency has increased in the market but continuous devaluation of the currency of a country will increase the inflation rate globally.

Reference

Bergsten, C.F. and Halm, G.N., 2015. Approaches to Greater Flexibility of Exchange Rates: The Burgenstock Papers. Princeton University Press.

Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.

Chkili, W. and Nguyen, D.K., 2014. Exchange rate movements and stock market returns in a regime-switching environment: Evidence for BRICS countries. Research in International Business and Finance, 31, pp.46-56.

De Grauwe, P., 2016. Economics of monetary union. Oxford university press.

Edwards, S., 2015. Monetary policy independence under flexible exchange rates: An illusion?. The World Economy, 38(5), pp.773-787.

Gabaix, X. and Maggiori, M., 2015. International liquidity and exchange rate dynamics. The Quarterly Journal of Economics, 130(3), pp.1369-1420.

X-rates.com 2017. Currency Calculator (US Dollar, Turkish Lira) - X-Rates. [online] X-rates.com. Available at: [Accessed 3 Aug. 2017].

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