Free

Forecasting Exchange Rates - Case Study Example

Comments (0) Cite this document
Summary
It should not dampen the hopes of Blade Inc to expand their operations in Thailand. The fact that Entertainment product Inc commits itself to import a limited number of Blade’s inc…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.7% of users find it useful
Forecasting Exchange Rates
Read TextPreview

Extract of sample "Forecasting Exchange Rates"

Finance and Accounting: Assignment al Affiliation QUESTION The Thailand money market has been violated and foreign investors are losing confidence. It should not dampen the hopes of Blade Inc to expand their operations in Thailand. The fact that Entertainment product Inc commits itself to import a limited number of Blade’s inc products is attributed to their unfavorable market condition in Thailand. The import from Thailand will be cheaper but their exports could potentially lose value in Thailand market.
Unfavorable economic conditions are caused by high inflation and high interest rates in the economic. Using fundamental forecast will depend on interest rate which could help the company understand the trends of the interest rate in the next quarter. The forecast, however, depends on probability which might cause uncertainty. Technical forecast will indicate the depreciation of the baht to help the company understand the how their money could be work for them understand these conditions (International Journal of Forecasting 2008). Technical forecast will however depends on fundamental forecast to get historical data of inflation and interest rate.
The market-based analysis is based on the market and their implication of inflation and interest rate. The market analysis depends on demand-supply analysis. The market based analysis will help the company understand the consumption of their products in the Thailand market. It also assists management to know what quantity of export is needed. The analysis is also inclusive of interest rates and inflation rate and how it will affect the demand and supply of their products (International Journal of Forecasting 2008).
Question 2
If in the reality the value of the baht 90 days from now is $0.22. Using technical forecast, baht will depreciates with six percent to give its vale at $ 0.22. Technical forecast shows that the expected results are equal to the real value. The fundamental forecast has three scenarios. The scenarios depend on the chances of depreciation and their percentage. If the chance for depreciation is 30% then baht will deprecates by 2% making the value of baht to be $0.18. 15 % chance of depreciates, baht will depreciates with by 5%, making the value of baht to be $ 0.21. 35 percent change, baht will depreciate with 10% making the value of baht to be $0.20.
Question 3
The market based analysis is involved in interpreting the calculation. In the calculations, it is true to say that fundamental forecast is accurate but tiresome. It offers a wide range of solution with different scenarios. The values from the fundamental are added then averaged to get an aggregate value that will help the company to understand the Thailand market. The average shows that the expected value will be $0.20. It deviated from the real value by $0.02 (International Journal of Forecasting 2008). The technical is accurate because the expected value is equal to the real value but it doesn’t offer varies option making it biased and one sided (International Journal of Forecasting 2008).
Question 4
The financial exchange forecast has been in the international market. Some people dealing in the foreign make have no clue about the fundamental value of a dollar in respect to other currency. When dealing in the international markets, most people prefer to use purchasing power parity. PPP is a theoretical law of one price which state that identical goods in different countries should have identical prices. It is just a theory that doesn’t happen in reality. The PPP enabled me to advise the Blade Inc to continue importing goods from Thailand since they are cheaper
Relative economic strength looks at the strong economic environment with potentially high growth rate that is more likely to attract economic investors. It looks at the investment flow in the economy and the factors that promote and high investment. Relative economic strength of Thailand is weak and thus investors have lost confidence it.
Reference
International Journal of Forecasting: The financial analyst forecasting literature: A taxonomy with suggestions for further research January–March 2008, Pages 34–75. Vol. 24 issue 1 Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Forecasting Exchange Rates Case Study Example | Topics and Well Written Essays - 500 words”, n.d.)
Forecasting Exchange Rates Case Study Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/finance-accounting/1687332-forecasting-exchange-rates
(Forecasting Exchange Rates Case Study Example | Topics and Well Written Essays - 500 Words)
Forecasting Exchange Rates Case Study Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/finance-accounting/1687332-forecasting-exchange-rates.
“Forecasting Exchange Rates Case Study Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/finance-accounting/1687332-forecasting-exchange-rates.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Forecasting Exchange Rates

Predictability of Foreign Exchange Rates

...deviation, skewness and kurtosis useless. This has added to the complexities in the study of financial and capital markets and made it more difficult to forecast their movements. (Cornelius, 2011, p.215) Different views: Predictability of exchange rates is both causes as well as effects of several key indicators of the economy. There is also another school of thought on exchange rate predictability which completely refutes the importance of exchange rates in the global arena. Research has found that there is a strong relationship between nominal exchange rates and the relative price...
24 Pages(6000 words)Dissertation

USD/CNY: Exchange Rates

.... The Chinese government is also good enough to respond to the concerns by slowly appreciating its currency to fair level. However, still the currency needs to go up in order to eradicate all the unfair advantage and to create advantage for countries other than China in international trade for the development of global economic system. References Forecasts.org (2012) Chinese Yuan to U.S. Dollar Currency Exchange Rate Forecast. [online] Available at: http://www.forecasts.org/yuan.htm [Accessed: 28 Mar 2012]. Google.com (2012) US Dollar: CURRENCY:USD quotes & news - Google Finance. [online] Available at: http://www.google.com/finance?q=USDCNY [Accessed: 31 Mar 2012]. Lipsey, R. and...
8 Pages(2000 words)Essay

Economics of exchange rates

...is that all the exchange rates should tally or just vary to a lesser extent. This is because, the US parent company expects that the forward exchange rate and the budgeted exchange rate, which are future values, to equal the spot exchange rate of a future particular time, to avoid higher financial disparities. Therefore, the parent company expects that the forecasts and predictions applied to determine the future rates will be accurate and have a high degree of precision. Spot exchange refers to the exchange rate at...
4 Pages(1000 words)Essay

Models for Forecasting Exchange Rates

...Models for Forecasting Exchange Rates The models used for an overview of methods to forecast exchange rates can be ified as: Structural Models - Flexible-price monetary (Frenkel-Bilson) model, the sticky-price monetary (Dornbusch-Frankel) model, and the Hooper-Morton model. "The relationship between the three models is best described in the equation: s = ao + al(m - m) + a 2 (y - y) + a 3 (r ,- rs) + a4(n e - ) + a s TB + a 6 TB + u, where s is the logarithm of the dollar price of the foreign currency, m -r the logarithm of the ratio of the US money supply to the foreign money supply, y -j p is the logarithm of the ratio of U.S. to foreign real income, rs-s is the short-term interest rate differential and nC- c... in various...
8 Pages(2000 words)Essay

Interest Rates an Exchange Rate

...in the international market, this increase in demand was anticipated to make the pound stronger against other major currencies, however a speculative attack by investors led to the loss of funds, the government lost and some investors gained huge profits on that day. Overview of the exchange rate interest rate model: This model depict that there is a relationship between the prevailing interest rates and the exchange rate, using historical data a country can use the data to estimate an appropriate model that will help in forecasting future values. The model depicts that a rise in interest rate will lead...
5 Pages(1250 words)Essay

Exchange Rates

...Exchange Rates Task: Exchange Rates There are several differences between flexible and fixed exchange rates. For example, in flexible exchange rate administration, the governments locate their money supplies and allow the exchange rates liberally adjust according to the ensuing ratio of the two money supplies. However, in a fixed rate administration, one of the two nations, with the agreement of the other, situates the exchange rate and allows its money distribution to adjust to suit to the level needed (Barro, 2008)....
1 Pages(250 words)Essay

Foreign Exchange Rates and Exchange Rate Risk

...Introduction International firms which trade globally has to deal in foreign currencies as international trade mostly takes place either in US $ or Euros. International transactions therefore are not incurred in the local currency of the organization and hence firm has to rely on foreign currency. It is however, important to note that the rates at which a foreign currency will be exchanged with local currency is mostly determined by the external forces, organizations therefore may have to incur losses too due to fluctuations in the foreign exchange rates. Foreign exchange rates in international market are determined by the demand and...
4 Pages(1000 words)Essay

Exchange Rates

...Exchange Rate Risk When we are dealing with currency risks, we need to make sure that we take appropriate steps to mitigate our risks or we might end up losing the bulk of our investment (P. COLLIER, 2012). Currency risk can broadly be divided in to three further categories, namely transaction risk (or transaction exposure), translation risk (or translation exposure) and economic risk (or economic exposure) (BJORN DOHRING, 2008). Below we will discuss each of these three types of risks in detail and determine the nature of the risk faced by the importer in question. Transaction risk occurs over a period of time. For instance, let’s say goods are sold by a vendor in United Kingdom to a customer in United...
8 Pages(2000 words)Essay

Fixed vs. Floating exchange rates

...Fixed vs. Floating exchange rates In a nutshell, an exchange rate refers to the price in one nation’s currency of one unit of another nation’s currency. Ever since the collapse of the Bretton Woods regime (soft peg) in the 1970’s, economists have never concluded the debate whether fixed or floating exchange rates are preferable. In my opinion, foreign exchange rates are crucial promoting international transactions while ensuring adjustments to disequilibrium and shocks. In effect, there are 2 systems of exchange rates i.e. fixed exchange...
2 Pages(500 words)Essay

Exchange Rates

...at improving the exchange rates between the U.S. and other countries (Mark, 2002). Banks in the U.S and other nations buy the domestic currency so as to make the exchange rates stable. This therefore means that the supply of money is controlled by the economic environment and targets a rate of interest for enhancing economic growth between the U.S and other nations. Mark (2002) claims that the exchange rate is negatively affected by this economic environment. The value of exchange rates between the U.S and other nations was reduced due to irregular flow of currencies and fluctuations in...
1 Pages(250 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic Forecasting Exchange Rates for FREE!

Contact Us