Kelsie Piccolo Kmp5304

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Oct 28, 2013 (3 years and 7 months ago)

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Brian Weimer Btw5024

Kelsie Piccolo Kmp5304

Zach Giallonardo Zag5015

Sun Young Cho sxc5113

Overview

1.
Purpose to choose the topic

2.
Generalization


-

Appreciation & Depreciation


-

Definition of
Exchange Rate

=
Equilibrium Price

3.
Analysis of the reason; why the dollar fluctuates

4.
Generalization of the relationship between the dollar
value and the international trading

5.
Actual Examples

Overview


-

Dollar VS Euro


-

Dollar VS YEN


-

Dollar VS KRW

6.
The effects caused by the fluctuation of the dollar on
the international trading


-

US Export & Import Data


-

Dollar Depreciation & Trade Deficit


-

Current Examples related to the Dollar Fluctuation;


South Korea


Japanese Automobile Industry


Japanese Electronic Products


Overview

7.
Conclusion


-

The Article excerpt



; The weak dollar & US Economy


-

The Reasons for the dollar’s rise


-

The ways to make the dollar value stabilized

Purpose


In order to broaden our knowledge about the
relationship between
supply and demand

among the
different countries through imports and exports.



In order to find the way to derive the best results from
the trading negotiation with other countries



In order to overcome the recent economical crisis
followed by the fluctuation of the dollar from the
Macroeconomics
viewpoint




Appreciation

is an increase of the value of the dollar relative to the
currency of other nations. After appreciation, the dollar buys more
units of the foreign currency. Ex. The current exchange rate for the
Dollar to the Yen market is $1 = 1

. If the dollar appreciates in value $1
may equal 2

.




Depreciation

is a decrease in the value of the dollar relative to the
currency of other nations. After
depreciation
, the dollar buys less
units of the foreign currency. Ex. When the dollar price of yen increases,
we say a depreciation of the dollar relative to the yen has occurred.

Foreign Exchange Rates


Exchange Rate; Equilibrium Price

: rate of exchange of one
nations currency for another nations currency


Exchange rates

are particularly important because they link the price
levels of various nations to one another.




=




Why the Dollar Fluctuates

1.
Economic
Recession

makes consumers reduce
spending.

2.
Fall in retailer sales leads to a drop in supply.

3.
Suppliers then cut investment expenditures


Decrease supply of capital goods

4.
Excess productive capacity


closing factories and laying off workers.

5.
Risk of
unemployment



consumers cut their spending

The Value of the Dollar


Dollar VS Euro
[http://www.advfn.com]

The Value of the Dollar


Dollar VS Yen
[http://www.advfn.com]

The Value of the Dollar


Dollar VS KRW
[http://www.advfn.com]

The US trade


In order to achieve the
full employment

in Supply and Demand
through
Specialization


US trades
[Reference; The Department of Commerce]


US Trade Deficit (Aug, 2008);
-

552,565,946,000

Depreciation and Trade Deficit


U.S. trade deficit = high levels


The fed looks to a dollar depreciation to satisfy the U.S.
need for foreign goods.


Three preventing factors


the use of the dollar in invoicing U.S. trade


the market share concerns of exporters


sizable U.S. distribution costs


A weaker dollar will increase foreign demand for U.S.
exports, but this adjustment is unlikely to close the
deficit completely.

Trade between USA & Korea


US Export in last 12 years


In 1997 ~ 1998, the dollar
value went up significantly
because Korea had a serious
financial crisis


Accordingly, US Export to
Korea decreased; the
increasing rate of US Export
was
minus 34%

Trade between USA & Korea


In 1997, Korea had a serious
financial crisis


There was not active flow of
the foreign currencies in
Korea


Naturally, the Dollar value
became higher


Korea was financially aided
by IMF (International
Monetary Fund)


In the end of 1999, Recover
the economic crisis


Japanese Automobile Sales


Toyota

forecasts its operating profits in the US market to descend 42%
and 51%


Nissan

expects its operating profits in its global sales to decrease 65.9
% from a year to 270 billion yen


These automobile companies supposed this phenomenon is caused by
the increase of the value of Japanese yen, compared to US dollar


Nissan lowered its global vehicle sales projection to 3.77 billion units

Japanese Computer & Electronic
Products


Sony

suffered year on year falls over 60 % in group operation and net
profit; the rise of the Japanese yen against the dollar is estimated to
lower operating profit by 4 billion yen


Nintendo
's July
-
September net profit fell 28 percent from a year earlier
to ¥37.56 billion, or $380 million, on sales of ¥413.5 billion


Fujitsu
; consolidated operating income decreased by 12.3%, compared
to the first half of fiscal 2007


Weak Dollar in the US Economy


The risks with a weak dollar
-
-
Foreigners could
decide that they're tired of financing our current
account deficit by investing in the United States, in
which case they'd demand a lower price for our bonds
and a higher yield to invest in dollars. That would
weaken the dollar. The Asian central banks could
decide they were holding too many U.S. government
securities...and decide to diversify.

[http://www.usnews.com/articles/business/personal
-
investing
-
guide/2007/10/11/behind the
-
weak
-
dollar
-
.html]

The Reasons for the dollar’s rise


Lack of confidence in other countries.


Economic slowdown has spread from US to Euro
-
zone area
-

leading to lower European interest rates.


Financial crisis has spread to other emerging economies.
Investors are even more nervous about these economies
than the US financial system.


There has been a strong demand for dollar as hedge funds
have been withdrawing their capital from oversees market,
and putting it into the relative 'security' of the dollar.
[http://www.economicshelp.org/2008/10/is
-
strong
-
dollar
-
good
-
for
-
us
-
economy.html]


Impact of a Strong dollar on
Global Economy


US export become more expensive; it leads economy to
further
recession


A stronger dollar increases the purchasing power of
American consumers, but American consumers are
more likely to try and boost their saving rates rather
than buy more imports


Strong dollar will worsen the US Current Account


Good for global exporters to US

[http://www.economicshelp.org/2008/10/is
-
strong
-
dollar
-
good
-
for
-
us
-
economy.html]

The way to improve


To make the dollar value stabilized


-

Proper
Fiscal Policy


1. Pro
-
growth tax cuts and counter
-
inflationary money


2. Slash corporate tax rates;



Increase American workforce


Increase corporate investment

3. Interest rate change by the Federal Reserve Bank


-

Cooperation among countries


-

Exchange Stabilization Fund (ESF) in US



Works Cited

Bivense L. J., (2004, December 14). Economic Policy Institute,
Debt and the dollar

The United States damages future living standards by borrowing itself into a
deceptively deep hole

[http://www.epi.org/content.cfm/Issuebrief203]

Bloomberg News, Reuters (2008, October 30). International Herald Tribune,
Nintendo's profit falls as yen

strenghtens

[http://www.iht.com/articles/2008/10/30/business/nintendo.php]

Fujitsu Ltd., (2008, October 29). Copyright 1995
-

2008 FUJITSU,
Fujitsu Reports Fiscal
2008 First
-
Half Financial Results

[http://www.fujitsu.com/global/news/pr/archives/month/2008/20081029
-
01.html]

Jiji Press (2008, October 31). Jiji Press,
Nissan Cuts Outlook on U.S. Slump

[http://www.japancorp.net/Article.Asp?Art_ID=20665]

Jiji Press (2008, October 29). Jiji Press,
Sony's Profits Tumble Over 60 Pct in April
-
Sept

[http://www.japancorp.net/Article.asp?Art_ID=20584]

Kudlow L., (2007, October 19). National Review Online
,
The Restoration of King Dollar

[http://article.nationalreview.com/?q=YjdjZGIzMTI4NDUzOTRmYzYxOTZmMDYzO
DQ5NDBmNTI]

McConnell C.R., Brue S.L., (2008, 17th Edition).
Macroeconomics
, NY, McGraw
-
Hill
companies



Works Cited

Molinski D., (2008, November 15). The Wall Street Journal,
Dollar Rises Against Euro
on Fall in Stocks, Weak Data

[http://online.wsj.com/article/news
-
currency
-
currencies
-
trading.html]

Pettinger, T., Economics help,
Is A Strong Dollar Good For US Economy?,

[http://www.economicshelp.org/2008/10/is
-
strong
-
dollar
-
good
-
for
-
us
-
economy.html]

Rowley L., (2008, November 6). BusinessWeek,
Toyota Profits Tumble as Yen Soars

[http://www.businessweek.com/globalbiz/content/nov2008/gb2008116_864302.ht
m?campaign_id=rss_topStories]

The Department of Commerce
[http://data.usatradeonline.gov/usatrade/Dim/dimension.aspx?ReportId=7028]

The Department of the Treasury [http://www.ustreas.gov/offices/international
-
affairs/esf/]

Unknown, (2007, October 11). US news & World,
Behind the week Dollar
[http://www.usnews.com/articles/business/personal
-
investing
-
guide/2007/10/11/behind the
-
weak
-
dollar
-
.html]

Zhou W., (2008, November 13). Reuters,
US dollar, yen give back gains; pound slide
continues

[http://africa.reuters.com/business/news/usnJOE4AC0RO.html]