Question

identify two factors that may be contributing to exchange rate volatility in your country during the last 12 months. b. if you were the economic for your business organisation, what advice would you give so as to mitigate the risks associated with exchange rate volatility over the next 12 months. substantiate your answer

Answer 1

(a)

Currency depreciation is decrease in the value of currency in a floating exchange rate systems. It can occur due to factors like interest rate differentials, economic fundamentals and invertor's risk aversion.

Tourism

Countries that have diversified range to visitors market tend to be more resellient against specific exchange rate margins compared to those who rely on specific visitor market.

(b)

• Setting up foreign currency account. So receive payments or pay bills in a foreign currency.
• Using currency option. Where protect a certain exchange rate and able to participate if market rate moves.