Question

Recently, you found that the U.S. dollar appreciated against the New Zealand dollar and depreciated against the Chinese yuan. If your goal was to promote U.S. exports, what would be your strategies? Address the concepts below within your submission.

Discuss the operation of the foreign exchange market.

Explain how traders benefit from the forward exchange market.

Describe how exchange rates are determined in a free market.

Response must be 300 words.

Answer 1

In this question, there is a condition where the US dollar appreciated against the New Zealand dollar and appreciated against the Chinese Yuan.
Here my goal is to promote US export so strategies are to increase the export activities To New Zealand and enhance the trade relationship with China.
The first concept is related with the operation of the foreign exchange rate in the foreign exchange rate; it is automatically with the help of demand and supply forces the exchange rate is adjusted and that's the only reason the condition of US dollar changes against New Zealand and China.
Traders benefit from forwarding exchange rate means the forward exchange rate is the exchange rate where the trade is decided on the basis of present rate and it is forwarded into some other date, for example, suppose US trader and Chinese trader decided to sale and purchase leather goods at a certain unit of the foreign exchange rate and this is applicable in the coming 3 months it is called as the forward exchange rate because it is applicable and fixed for the coming three months on the rate which is decided by the US trader and Chinese trader.
Next point is related with exchange rates are determined in a free market this concept is related with the demand and supply forces in the foreign exchange market of the foreign currency it is the automatic forces where the foreign exchange rate is adjusted as per the demand of foreign currency and the supply of foreign currency in the international foreign exchange market.
There are various factors on which the demand of foreign currency depends and there are also various factors on which the supply of the foreign currency has based the demand of foreign currency and the supply of foreign currency can change frequently in the world trade and this is the only reason the foreign exchange can change according to the market conditions and the rate can be changed many times in a day.