Consequences of weak US Dolar to Czech company

Essay by PardubackaUniversity, Master'sB, October 2008

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“Dollar sinks lower after US data.”“Czech koruna rises to record highs against euro and dollar.”“Dollar Falls Again, Euro Zone Divided.”We can see the headlines mentioned above and very similar ones in various newspapers all around the world nearly everyday. I have chosen this topic as my post-work individual assignment because the weak dollar is influencing my everyday work. I work as a launch manager for a Czech company owned by an American company, and I am responsible for launches of all products produced by the Czech company in all countries.

I do not want to analyse why the dollar is weak or what should be done to improve the situation because there already exist many articles about this topic and because I am not an expert for exchange rate markets. I would like to think about and to discuss the consequences related to my job and company.

After the US government announced a bigger-than-expected decline in job numbers last month the dollar fell down to a record low against the euro, above $1.54

(data from 7th March 2008), and at the same time fell against a basket of major currencies. A weakening US economy means lower interest rates and lower dividends on US assets.

Nearly daily we can hear new information about bad US economy which causes deeper and deeper collapse of the dollar. The Federal Reserve lowered a key U.S. interest rate by three-quarters of a percentage point to 2.25 percent, but investors did not seem to care because the cut was smaller than many had expected (18th March 2008). In spite of series of interest rate cuts and liquidity-providing measures, the US economy has decelerated sharply. A recent report shows a loss in jobs, reduced factory output and a drop in retail sales.

On the other hand...