Research an event related to Currency Exchanges, or Currency Fluctuations

The discussion posts in this class require professional essays and are worth 10 points in total each week.

Original discussion thread post due by *Thursday at 11:55 PM (EST)*.
Research an event related to Currency Exchanges, or Currency Fluctuations, and how it affects the transactions of international business Be sure to use credible sources for this current event.
Other Requirements
The original post must contain a minimum of 300 words. Students must demonstrate critical thinking by paraphrasing the material into their own words.
All citations should be in APA format with a reference listing at the bottom of the post.
Cite 2 quality sources.

Two reply posts are due by Sunday at 11:55 PM (EST)*
Review other students’ posts before deciding what and where to structure reply posts. Students must post a minimum of 2 replies that must be unique to other students. Replies should build upon the original discussion thread (and other replies posted prior) with further details on lesson concepts, additional research, business examples, etc.
Replies require short essays and must contain a minimum of 100 words each. Replies must be constructive which means they do not simply state agreement or disagreement re-highlighting points already made in prior posts. Replies must offer additional information or input to the discussion and lesson concepts.
Research Help
All cited articles in this course must come from a reliable source to earn credit. If you need help with research, there is assistance available. Review the following resources:

Learning Resources Services for Students
SPC Online Library
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Learning Resources’ Contact Information Guide
Academic Search Complete
America’s News
Discussion Rules

Do not attach files (or drag and drop) to Discussions. Attachments will receive 0 points, as other students should not have to read attachments. This is to avoid spreading viruses. Do copy and paste to the Discussion topic.
Assignment posts will be graded for content and completion. College-level grammar, spelling, and punctuation are always required.
Your assignment post must meet the minimum word count when one is given, and include the word count.
Read the reply posts to your assignment post, especially if they are from your professor.

ANSWER

Currency Fluctuations and International Business

Currency fluctuations tend to occur as a result of floating exchange rates. Major economies like the United States and the United Kingdom face such fluctuations on a regular basis. The floating exchange rates are influenced in numerous ways, including a country’s economic performance, inflation, capital flows, and interest rate differentials, among other factors (Eichengreen et al., 2017). The prevailing exchange rates get affected by the prevailing strength or weakness of the economy. As a result, this affects international business in terms of imports and exports either negatively or positively at the expense of the country in question. This essay analyses how currency fluctuations affect business and their implications on the economy.

The country’s exchange rates tend to have far-reaching currency impacts on international business and merchandise trade. For instance, a weak currency tends to make goods cheaper for export while simultaneously making imports expensive (Eichengreen et al., 2017). On the other hand, a strong currency helps the country realize a trade surplus or trade deficit over a period of time. Trade deficits occur when the economy is strong, and the rate of exports is reduced. This, in turn, makes imports cheaper and exporting expensive, and thus, creates a trade deficit. However, for a country to register a high GDP, it must ensure that the net export is higher. This means that net exports have an inverse correlation in regard to the strength of their economy.

In addition, currency fluctuations also affect a country’s capital flow. Capital flows are foreign investors who tend to thrive in economies that are dynamic and stable. The United States dollar maintains its stability over a long period of time, thus being an attractive country for foreign investments. Exchange rates that lead to the depreciation of the economy reduce the chances of the country attracting foreign investments (Gopinath et al., 2020). Foreign investments help in boosting the domestic economy, creating employment opportunities and tax generation. Therefore, it is essential for economies to be stable and have strong governments that put in place sound economic policies.

Through capital flows, economies like China and India are able to thrive. For instance, foreign direct investment (FDI), a type of capital flow, ensures that foreign investors build new companies and industries in recipient countries that generate money (Gopinath et al., 2020). The second type of cash flow, foreign portfolio investment, entails the buying and selling of trade securities in recipient markets (Gopinath et al., 2020). Both forms of investments pump money into the recipient markets, but most governments prefer FDI. This is because foreign portfolios are generally on a temporary basis that tends to change with the depreciation of the currency.

References

Eichengreen, B., Mehl, A., & Chitu, L. (2017). How global currencies work. In How Global Currencies Work. Princeton University Press.

Gopinath, G., Boz, E., Casas, C., Díez, F. J., Gourinchas, P. O., & Plagborg-Møller, M. (2020). Dominant currency paradigm. American Economic Review, 110(3), 677-719.