SEPTEMBER 2010

SMBA 13 – Team KEITH

CURRENCY FLUCTUATION
Presenters

Ela Chhuchhar -16

Hetal Shah - 02
Sachin Sawant - 46
Swapnil Akewar- 23
Jiten Solanki -
Vaibhav N Gulwadi - 33

Accountancy Project – SMBA 12 (2010 – 2012)

 Currency Fluctuation

Currency fluctuations are simply the ongoing changes

between the relative values of the currency issued by one
country when compared to a different currency.
The process of currency fluctuation is something that occurs
every day and impacts the relative rate of exchange
between various currencies on a continual basis.
It is currency fluctuations that investors in currency
exchange deals look to closely in order to generate a profit
from their investments.
Factors Affecting Currency Fluctuation or Causes of Currency
Fluctuation

Interest
Balance
Rates
Inflatio of Trade
of Trade
n Market
Speculator
National
s
Income
Or
GNI
Currency
Fluctuation

Internation
al Profits

Economi
c Indices Economic
Foreign Debt Position
 Currency Fluctuations Affect International Investments

Invest $1,000 in the Toyko Stock Market with

an Exchange Rate of 100 Yen per U.S. Dollar.*

U.S. Dollars Exchange Rate Ending Value

$1,000 80 Yen $1,200

$1,000 100 Yen $1,000

$1,000 120 Yen $800

*Values given represent a hypothetical $1,000 investment made and its ending value
when converted after a change in exchange rates.
Protection Against Currency Fluctuation
“Hedging your currency risk is something that most people, whether
they are importing or exporting, should be doing as a matter of course.”

The two main options available to

help businesses manage these risks
are forward contracts and currency
options :-
• Forward Contract or Forward
Foreign Exchange Contract
• Currency Option
• Opening Foreign Currency
Accounts
 Minimizing impact of differing in Currency Fluctuations

Currency fluctuation is among the most frustrating

dynamics for a global brand to contend with.
• Develop strong banking relationships
globally
• Barter has become a very inventive way of
allaying the fluctuation in currency
• Imperative to seek advice and then enter
into long term contracts
• Thinking Globally
• Change in the global business environment.
 Top 10 Currency Traders
Percent of overall volume, May 2010 Rank Name Market Share
Deutsche Bank 18.06%

UBS AG 11.30%

Barclays Capital 11.08%

Citi 7.69%

Royal Bank of Scotland 6.50%

JPMorgan 6.35%

HSBC 4.55%

Credit Suisse 4.44%

Goldman Sachs 4.28%
Morgan Stanley 2.91%
How Dollar Fluctuations Impacted the Indian
Economy??
1. Switching to Floating rate model from Fixed rate model.
2. Huge inflow of foreign capital into India in US dollar
through Foreign Direct Investment.
3. Concentrating more on Exports for FX Reserve and to reduce
Balance of payment (BOP) gap.
4. Appreciation of Indian Rupee against US Dollar impacted
heavily to the following:-
• Exporters
• Importers
• Foreign investors
 The Impact of Rising Rupee on the Indian Economy
The main reason for the INR's appreciation since late 2006 has
been a flood of foreign-exchange inflows, especially US dollars. The
surge of capital and other inflows into India has taken a variety of
forms, ranging from FDIs to remittances sent home by Indian
expatriates. Major forms of capital and other inflows are:

1. Foreign Direct Investment (FDI).

2. External Commercial Borrowings (ECBs).
3. Foreign portfolio inflows.
4. Investments and remittances.
 Ranking & Predictions of Indian Economy:
• India's GDP at current prices will overtake that of France and Italy by 2020 and
that Germany, UK and Russia by 2025.
• By 2035, India is expected to be of 3rd largest economy in the world behind US
and China overtaking Japan.
• India's expected growth rate of 5.3 to 6.1% in various periods in the past, at
present India is registering more than 9% growth rate. And this way, "India
could overtake Britain and be the world's fifth largest economy within a decade
as the country's growth accelerates.“
• "In thirty years, India's workforce could be as big as that of the United States
and China combined.“
• Presently India is the third largest economy in the world as measured by
Purchasing Power Parity (PPP) and twelfth largest in the world as measured in
USD exchange-rate terms, with a GDP of US $1.0 trillion.
 Present scenario:
The current impact of rupee appreciation is best
demonstrated by what it has done to our textile exports, a
highly employment-intensive sector, driven by small and
medium enterprises (SMEs). From a healthy export growth
rate of 21% in 2005-06, it has plummeted to a mere 4.6%
during the 11 months of 2006-07.

Conclusion:
Though the strengthening of the rupee will benefit certain
industries, others might face the brunt. But the gain will be to the
entire Indian economy. The basic foundation for any country to
become an economic superpower is to have a strong
infrastructure. This need for huge investments, are being met
through FDIs & FIIs. Similar developments in other key areas would
truly help India to reach the position of the 3rd largest economy of
the world behind US and China by 2035.
THANK YOU!!!