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International Financial System

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I am working on my masters and need assistance with the following questions:

1) Some people are arguing that the Chinese Yuan Renminbi (CNY) could take over the US dollar and the Renminbi will become the next reserve currency. Please read the following articles:

Frankel, J. (2011). The rise of the Renminbi as international currency: Historical precedents. Retrieved May, 2012, from http://www.voxeu.org/index.php?q=node/7075

US Department of Treasury (2012). Renminbi as the next reserve currency: Potential, challenges, and implications. Retrieved May, 2012, from https://infocus.credit-suisse.com/data/_product_documents/_articles/342047/Amia_Liu.PDF

Oliver, C. (2012). China's Yuan set for more international role. Retrieved May, 2012, from http://articles.marketwatch.com/2012-01-26/investing/30734300_1_chinese-currency-yuan-currency-policy

Based on your analysis and findings, will Renminbi replace the US Dollar as the world's most popular currencies to hold? Will Renminbi become the next reserve currency? Why? Please explain your reasoning.

2) Is the exchange rate of the Mexican Peso (one of the emerging market currencies) determined in a fixed or in a floating exchange rate system? Please explain your reasoning.

3) Is the exchange rate of the Indian Rupee (one of the emerging market currencies) determined in a fixed or in a floating exchange rate system? Please explain your reasoning.

4) To what extent is the Emerging Market (EM) Currency trading risky? Please explain your reasoning.

5) Based on your analysis and findings, what would you recommend to international market currency investors?

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Solution Preview

1) Based on your analysis and findings, will Renminbi replace the US Dollar as the world's most popular currencies to hold? Will Renminbi become the next reserve currency? Why? Please explain your reasoning.

China has started to perform some of their international trade in the Renminbi currency. Further, foreign central banks are now holding the Renminbi currency. The basis for the prediction that the Renminbi will overtake the US dollar because the Chinese currency will overtake the US currency. Further, the Chinese government is actively promoting its currency in the international market (The information was obtained at http://www.voxeu.org/article/rise-renminbi-international-currency-historical-precedents).

China has plans to change their Forex rules and increase the international trade of their currency. China sets the pace of the rise in the currency. If the Yuan rises too fast, the manufacturing sector could become bankrupt. In 2012, the annual gain of Yuan will be 2.7% vs. the US dollar. The Chinese currency will continue to rise despite the weak global export outlook (The information was obtained at http://articles.marketwatch.com/2012-01-26/investing/30734300_1_chinese-currency-yuan-currency-policy).

Despite the budget shortfalls and downgrade of the US economy by the S&P, the US dollar is still the dominate ...

Solution Summary

International financial systems are examined.

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See Also This Related BrainMass Solution

International Finance in Strategic Operations Sudanese Market

See attached file.

Prepare a paper on the possibility of entrance into the Sudanese Market. Based on the summary below, please answer the following questions.

Exposition for the individual paper:

Sudan has found deposits of oil and Boron in the extreme southwest of the Bahr Al Ghazal region, near the Central African Republic and Congolese borders. The new Sudanese government has decided to send the exploration rights out to bid. ExxonMobil bid and won the rights to exploit Sudan's newly discovered natural resources. The President of the oil exploration SBU has given you the task to determine the feasibility of operating in Sudan.

A. Using this week's readings, illustrate the shape of Sudan's capital markets by answering the following questions:

1) Describe the financial system.
a. Is Sudan's monetary policy a pegged or crawling system, managed or
independent float, fixed-rate or target-zone arrangement?
b. What are Sudan's Current account, capital account, and balance of
payments with developed countries or regions such as the United States,
Germany, Japan, England, NAFTA countries, or Saudi Arabia? Please pick
any two developed countries and/or regional trade blocks.
c. Who is Sudan's major trading partners, and what is Sudan's Current
Account relationship with them? Is it negative, positive, or neutral?
Describe briefly what a positive, negative, and neutral current account
balance between Sudan and its major trading partners mean. (If there is
more than two, just choose the top two countries.)
d. What is Sudan's relationship to international financial institutions such as
the World Bank, World Trade Organization, International Monetary Fund,
the UN, and/or UNESCO? Is it positive, negative or neutral? Briefly
describe what a positive, negative and neutral relationship would be
between a developing country and any two international institutions.

2) According to Chapter 9 in Shenkar & Luo, pages 237-240, about the Determinants of Foreign Exchange Rates:
a. Which weakness or weaknesses of the Purchasing Power Parity apply to
Sudan?
b. Do these weaknesses undermine Sudan's capital markets?
1. If so, what affect does it have on the capital markets?
2. If not, what characteristic of Sudan's capital markets are able to
withstand the intrinsic weakness of the PPP?
c. Using Interest Rate Parity (IRP) as a guide, determine the stability of the
Sudanese dinar. Compared to its nearest neighbors, how does the
Sudanese dinar rank- more or less stable than its neighbors, or average
among its neighbors?

B. What are the financial implications for ExxonMobil if Sudan's capital markets cannot handle the influx of large amounts of foreign direct investment?

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