FIN4006: Foreign Exchange Market, International Monetary System and Balance of Payments: International Finance Essay, SIT, Singapore

Essay TOPICS: Foreign Exchange Market, International Monetary System and Balance of Payments

Select any one of the following countries:

Nigeria, Peru, Egypt, Laos, or Norway.

You are tasked to write a report on the selected country using the knowledge you have learnt in the first five lessons.

You are to advise the reader on the recent trends in the currency of the selected
country. Examine the various factors that have an impact on the movements of the currency.

Given the research and analysis that you have conducted, you are to summarize
your findings and provide relevant recommendations to the reader who may be interested in trading (importing/exporting) or investing in the selected country.

Please note that the notation used in the course notes for a particular currency’s spot exchange rate (e.g. Singapore Dollar) is S(SGD/USD) which is the amount of SGD per USD. An upward trend in the chart means that the USD is strengthening and SGD is weakening.

For many charts used by market analysts, the convention would be USD/SGD which implies 1 USD is equivalent to the stated number of SGD. Note that the S is not written for the market convention.

Hence S(SGD/USD) (academic version) is equivalent to USD/SGD (market analyst convention) when you examine the chart. A downward trend means that the USD is weakening and the SGD is strengthening.

This convention is used for most currencies except for some. An exception here is the NZD. The market convention here is NZD/USD which is equivalent to S(USD/NZD) which is the number of USD per NZD. An upward trend would indicate that the NZD is strengthening.

In your report, you may consider the following questions as a guide to organizing the structure of the report.

Describe the historical development of the particular chosen currency regime and the trend of the balance of payments (current and financial accounts).

How did the currency movements affect the country’s competitive advantage and foreign currency reserves?

What has been the significant impact (if any) of the following factors on the currency movements? Factors: Inflation, interest rates, growth rates. Select those factors which are relevant and impact currency movements.

What is the risk of an international financial crisis and financial contagion from the problems with the particular selected country on its neighbouring countries and trading partners?

What kind of recommendations do you think would be useful to manage the problems involved?

What kind of advice would you give to companies who wish to consider trading with these countries or considering investing in them? You may also highlight any relevant country and financial risks that should be considered.

You may also combine the experiences of two or more from the list of these countries if the content from one country is insufficient for your discussion.

You should try to link the material learned in this course to discuss the impact from an International Finance perspective. This may include deregulation, the balance of payments, exchange rate systems, foreign direct investments, financial and country risks, etc.

You may also include other themes that are relevant to the development of International Finance.

You may submit as many copies of the assignment before the deadline. Check the similarity index. If the similarity index is high, do make the appropriate revisions to the essay and submit it before the deadline. Only the last submission will be kept and marked.