Week 2 Discussion 2 Response to: Chee Chee (she/her/hers) The top ten most traded currencies in the world in 2021 include (1) U.S. Dollar (USD), (2) Euro (EUR), (3) Japanese Yen (JPY), (4) Pound Sterling (GBP), (5) Australian Dolar (AUD), (6) Canadian Dollar (CAD), (7) Swiss Franc (CHC), (8) Chinese Yuan (CNY), (9) Sweedish Krona (SEK), and (10) New Zealand Dollar (NZD) (Pritam, 2021). This week, I aim to purchase $10,000 of any foreign currency that I believe would appreciate quickly and re-evaluate the currency value in two weeks. Although the U.S. GDP declined by 1.6% quarter-over-quarter in the first quarter of the year, the U.S. dollar remained strong and continued to appreciate as the Fed raised the rate to fight inflation. In this environment, finding a foreign currency that appreciates against the U.S. Dollar is difficult. Below is the research I conduct to choose a potential appreciative foreign currency against the US dollar. Foreign Currency that depreciates against the US dollar (1) Euro – The Euro is currently under inflation fears that continue to send investors to the U.S. dollar. For example, the exchange rate of USD/EUR was $1 / €0.84 in June 2021, and now $1 / €0.96. That means if I $10,000 to purchase €840 in June 2021, it is now only worth $878.11 today (2) JPY – The yen has depreciated by more than 18% against the US dollar since the beginning of the year. It was $1 / 113.68 JPY in Jan22 and now $1 / 136.59 JPY on Jun 22. (3) Indian Rupees – Indian Rupees have already lost more than 6% since January and could and could it the 80-mark against the US dollar (Singh, 2022). Potential appreciation against the US dollar (1) The Covid-19 lockdown in China in April this year drove the USD/CNY exchange rate to sharply depreciate from $1 / 6.34 CNY on March 30, 2022, to $1 / 6.78 CNY on May 15, 2022. The recent ease of lockdown and other positive news could appreciate the Chinese Yuan against the US dollar. Conclusion With the current strong US dollar where the Fed is raising the interest rate, I would most likely choose to keep the US dollar as the dollar moves higher against other major currencies. If I were to decide to purchase a foreign currency with a $10,000 US Dollar, I would choose to buy the Chinese Yuan. $10,000 can purchase $66,960.62 Chinese Yuan Renminbi (1 USD = 6.69606 CNY / CNY = 0.149342 USD). The reason behind trading CNY is hoping that the reopening of the Chinese economy and lockdown could potentially appreciate the Currency against the U.S. Dollar. We could also see the yuan recover as China’s exports rebound. Understanding the currency trends, fluctuation, and risks help companies to choose the correct hedging strategies to mitigate the risks created by the FX market volatility. For a company that works with Chinese suppliers, invoicing the goods in CNY will benefit the company’s operation if the CNY appreciates against the US dollar in the future. -Nicole Reference: Primtam, A. (2021, July 07). Most Traded Currencies in the World in 2021. BookMyForex.com. https://www.bookmyforex.com/blog/traded-currencies-world-2021/#:~ (Links to an external site.) Singh, S. (2022, June 29). Rupee could sink all the way to 80 a dollar soon. Here’s why. MSN. https://www.msn.com/en-in/money/markets/rupee-could-sink-all-the-way-to-80-a-dollar-soon-heres-why/ar-AAZ19tE?ocid=BingNewsSearch&fromMaestro=true (Links to an external site.) XE (n.d.) https://www.xe.com/currencyconverter/convert/ (Links to an external site.)?
