Answer to Question #87352 in Macroeconomics for Mantaj Kaur

Question

Assume that you are an Australian firm exporting software products to the United States. Explain the impact of this recent drop in the AUD on your business.

Answer 1

A company that exports goods is interested in the stability of the exchange rate. There are many financial instruments that can help an enterprise withstand the change in exchange rates. If there is a risk of a fall in the value of the national currency, the company сan purchase an option to purchase the customer’s currency, which would cover part of the losses. Customers pay in USD. If the dollar becomes more expensive, then the company will receive more remuneration in AUD. If USD losses its price, we can use oprions with short possition. If USD rises or stays in present price, the company will pay only for commission