Billabong Example Essay

п»ї1. Make clear why exchange rates had been so unstable in recent years/ What are the implications of this volatility for companies like Billabong?

There are a large number of impact on at work in the foreign exchange market segments. The most obvious are shifts in fundamental demand for a foreign currency that displays the outlook for the economy. For example , in the event Australia is exporting more goods and services, foreign buyers will need to buy Aussie dollars to pay for them. That could put upward pressure for the value with the currency. Everything else being equivalent, countries operating large trade surpluses – meaning that they export more than they import – will need to see all their currencies surge over time. Nevertheless , the value of the dollar is also driven by speculation because traders strive to profit from the underlying styles of the activity of one forex against one other. A significant quantity of activity in forex markets contains borrowing in currencies in which interest rates happen to be low and investing in ones with higher rates. In periods of low volatility, such as coming from 2002 to 2006, this technique can be very successful. However , in recent times a higher­-yielding currency can be potentially seen as a sign that problems are gathering in the economy. In periods an excellent source of volatility including now, taking a chance directly on forex movements is usually considered too risky to get private traders as it can conveniently lead to large losses. Ordering overseas-­listed stocks or purchasing funds that hold foreign assets is the most obvious way in which it is likely an investor will end up exposed to foreign exchange risk. When it comes to Billabong as being a globally renowned company, this means that much of the overseas with regard to its products could be unpredictable to a large degree and hence present challenges for the company in maintaining competitiveness from this environment.

2 . What does a falling Australian dollar imply for Billabong's ability to compete in the global market place? How does your response...