Impact of Fluctuating Rate Global Business

Question: Discuss about the Impact of Fluctuating Rate for Global Business. Answer: Introduction Due to the impact of globalization the business has no boundary, it crosses across the border. Moreover, as different countries have their own currencies their and own valuations thus, money exchange across the border play important role in international business (Grimwade, 2000). However, the exchange rates among different currencies do not remain same all the time but it varies time to time by several factors. The fluctuation of different currencies impact on the international business deals and thus, it has been taken as prospective research topic for this research proposal. Background of research The initiation of the international trade had been occurred from ancient age, and then barter method was the process of exchanging goods among the traders. Afterwards, in order to facilitate the business use of currencies begun. However, because of different various factor the exchange rate has been fluctuated in constant basis (International Crude Oil Trade, Year 2013, 2015). The economic performance of country, overall financial and business performance of the country, interest rate parity, inflation rate, and employment rate play significant role in the fluctuation of the currency price in foreign exchange market (Rosenberg, 2003). The fluctuation of FX Rate has significant impact on the business communities, specifically the companies playing in the international market means the exporters and the importers are mainly affected by the FX Rate fluctuations (International Refined Products Trade, Year 2014, 2015). The particular research is on the FX Rate fluctuation and its impact o n the domestic businesses, which plays globally. Problem statement In case of the FX Rate swing in favour of the domestic currency then the rate of the domestic currency will be hiked, and then the exporters have to face severe loss because they got payment in foreign currency but they have to invest domestic currency in order to produce the product materials (Weithers, 2006). Therefore, good performances of the domestic currency fetch losses to the exporters, whereas the importers are benefitted by the good performance of the domestic currency as they have to pay in foreign currencies. On the other hand, in case of domestic currency provides bad performances then the exporters are benefitted and the importers have to face monetary losses. Research aim and objectives The research aim to detect the risks for the business occurs due to the volatility of FX rate. The objectives of the research are; To detect the impact of FX rate on international business. To understand the factors, which are liable for the fluctuation of FX Rate To find out effective remedies so that the impact of currency fluctuations can be minimized. Research questions Q1: Is there any major impact of volatile nature of FX Market on the international market? Q2: What are the key factors of the volatility in the FX market? Q3. How the impact of the volatile FX Market on global organization can be restrained? Hypothesis Hypothesis of the research are as follows: H0: Volatile FX market has direct impact on the business organizations; specially, the organization doing business internationally. H1: Volatile FX market has not any direct impact on the business organizations Literature review The FX rate is prone to be volatile as there are different factors, which influence rate of foreign exchange. Difference in interest rate, difference in inflation, Current account scarcities, Public debt, term for trading along with the political stability and economic performance of the domestic country are the significant variables of FX market (Wystup, 2006). Because of the different variables the performances of the domestic currency in international market use to fluctuate (Ree, Yoon, Park, 2015). Moreover, the fluctuations of the domestic currency in the international market greatly influence the business of the business organization, especially, the organization, which has exposure in the international market. The profitability of the organization hugely varied because of the FX Rate fluctuations. Even for the FX rate fluctuation the organizations have to face severe monetary losses (Ree, Yoon, Park, 2012). The global players more specifically the firm involve in export or i mport business are mainly affected by the FX Rate fluctuations. Variable The key variables that influence the FX rate are, difference interest rate, inflation, interest rate parity, political stability economic performance of domestic nation etc (Grieb, 2013). Operational definitions and measurement The companies doing business internationally must keep an eye on the FX market as the volatility in FX market can impact on the profitability of the business of these organizations (Reiswich Uwe, 2012). Good performances of the domestic currency fetch losses to the exporters, whereas the importers are benefitted by the good performance of the domestic currency (Kliatskova Mikkelsen, 2015). On the other hand, in case of domestic currency provides bad performances then the exporters are benefitted and the importers have to face monetary losses. Research methodology The quantitative research methodology has been applied for the research so that a widespread understanding can be achieved about FX market volatility (Ong Barkbu, 2010). Research process The secondary research help in acquiring the basic ideas and the primary data help in accomplishing the research aim and objectives. Research design Descriptive design has been applied for the research for acquiring deep detail knowledge on the research topic. Data collection tools A survey technique has been applied for collecting the essential data for the research. Data analysis For effective analysis of the data statistical tools, various charts and tables have been used. Dependent and independent variables Dependent variables are the variables than an individual wish to predict, estimate and what is affected when executing the experiment and things that is affected in the experiment. Independent Variable Independent variable is the variable that can be changed and one can control the variables (Rebonato Rebonato, 2004). Conclusion As per the findings of the research process, the conclusion has been made, from the conclusion the necessary understanding about the approval of the hypothesis has been made and the recommendations are also made by the conclusion (Ree, Yoon, Park, 2015). References Grieb, T. (2013). Does FX Volatility Affect the Distributions of Commodity Futures Returns?.International Journal of Financial Research, 4(4). Grimwade, N. (2000).International trade. London: Routledge. International Crude Oil Trade, Year 2013. (2015).World Oil Trade, 37(1), pp.33-42. International Refined Products Trade, Year 2014. (2015).World Oil Trade, 37(1), pp.63-72. Kliatskova, T. and Mikkelsen, U. (2015).Floating with a Load of FX Debt?. [Washington, D.C]: International Monetary Fund, European Department. Ong, L. and Barkbu, B. (2010).FX Swaps. Washington: International Monetary Fund. Rebonato, R. and Rebonato, R. (2004).Volatility and correlation. Chichester, West Sussex, England: J. Wiley. Ree, J., Yoon, K. and Park, H. (2012). FX Funding Risks and Exchange Rate VolatilityKoreas Case.IMF Working Papers, 12(268), p.1. Ree, J., Yoon, K. and Park, H. (2015). FX funding risks and exchange rate volatility.Emerging Markets Review, 25, pp.163-175. Reiswich, D. and Uwe, W. (2012). FX Volatility Smile Construction.Wilmott, 2012(60), pp.58-69. Rosenberg, M. (2003).Exchange-rate determination. New York: McGraw-Hill. Weithers, T. (2006).Foreign exchange. Hoboken, N.J.: John Wiley Sons. Wystup, U. (2006).FX options and structured products. Chichester, England: Wiley.