Essay on Global Business Operations : International Financial Markets

Essay on Global Business Operations : International Financial Markets

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Global Business Operations
In Global terms the US Dollar is the leading currency and now the Euro is the second most important with the Sterling British Pound third. When the euro came into being, monetary policy became the responsibility of the independent European Central Bank (ECB), which was created for that purpose, and the national central banks of the Member States having adopted the euro. Together they compose the Euro system. Hence ECB is monitoring the Euro currency with the guidance of all the EU members.
International financial markets play a crucial role in global business. Business firms face many opportunities and threats from monetary systems and financial/capital markets. Organizations might issue securities in euro currency, because it will enable the companies to avoid a variety of monetary authority regulations and controls, and it provides them with an opportunity to escape the payment of some taxes. Thus this allows tax benefits and may be in terms of interest rates. Moreover the regulatory costs are also less. Thus the firm can raise the money in Euro currency markets. The Eurocurrency market helps to avoid many United States banking regulations and controls, and it can lead to reduction in the payment of some taxes. Thus the reasons that have led to the growth of the this market include the interest equalization tax, United States withholding tax on interest received by foreign owners of domestic securities, Regulations M and Q, and regulations from the U.S. Office of Foreign Direct Investment (OFDI).
The US dollar has declined heavily against Euro. In fact as of now 1Euro= 1.23US Dollar. Economic theory states that there are four major factors that determine the exchange rate between two curr...

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...S control. Now the investor has another option in form of EURO. Some of the subsidy the USA gains would be transferred to the EU and help balance out some of the problems of the present heterogeneous economic structure still in place. The strength of the euro relative to the US dollar might encourage the use of the euro as an alternative reserve currency. Thus no one has to be dynamic and keep track of both Euro and dollar movements to make the future strategy.
According to the EC, the benefits of Euro are elimination of exchange rate fluctuations; businesses are better able to plan their investment decisions because of reduced uncertainties; elimination of the various transaction costs; and price transparency as well as enhanced competition, more opportunities for consumers, and more attractive opportunities for foreign investors with the benefits of the Euro.

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