FACULTY OF BUSINESS AND MANAGEMENT

INTERNATIONAL FINANCIAL MANAGEMENT

(FIN542)

INDIVIDUAL ASSIGNMENT
“THE IMPACT OF CURRENCY CHANGES ON IMPORTS AND EXPORTS”

PREPARED BY:
NATASYA HANIM BINTI ILIAS
2021864616

PREPARED FOR:
MADAM FATHIYAH BINTI ISMAIL

SUBMISSION DATE:
26th of MAY 2022
 The impact of currency changes on imports and exports

Currencies, like other things, are determined by demand and supply. Foreign
exchange markets, which are marketplaces for trading currencies, are where most of
these transactions take place. To simplify, currencies appreciate when a lot of
people want to buy them, and they depreciate when fewer people want to buy them.

Thus, a currency's supply and demand can fluctuate due to a variety of reasons
such as a country's attractiveness to investors, commodity prices, and inflation.
Hence, currency fluctuations are a natural outcome of most major economies' use of
variable exchange rates. A country's economic performance, inflation expectations,
interest rate differentials, capital flows, and other factors all influence exchange
rates.

Many people are unconcerned about exchange rates because they are rarely
needed. The normal person's daily activities are undertaken in their own currency.
Exchange rates are only relevant for a few transactions, such as international travel,
import payments, or international remittances. The strength or weakness of the
underlying economy tends to determine the exchange rate of a currency. Likewise,
the higher the currency value of a country, the more expensive it is for outsiders to
buy its exports. Similarly, the cheaper goods from other countries are for citizens in
that country. As a result, a higher exchange rate reduces exports while increasing
imports, and vice versa as well as the value of a currency might fluctuate from one
moment to the next.

Imports, in definition, are items made in another country but sold in the home
country. When individuals in one country want a product from a company in another,
they must first buy that country's currency in another market. They can buy the thing
when the currency has been exchanged. For example, if we owned a network of
Malaysian Ringgit (MYR) stores and wanted to buy various things from big Thailand
corporations, we cannot just make a payment in MYR to the Thai companies.
Companies in Thailand would prefer to be paid in their own currency. So, we need to
go to a foreign exchange market and buy Thailand currency in Malaysian Ringgit. As
a result, demand for imported goods and the currency required to acquire them will
increase. When we import, however, when our local currency depreciates or

2
weakens, the items we buy become more expensive. We now have to pay extra
Malaysian Ringgit (MYR) to buy foreign money, making Thai goods more expensive.

However, the situation has shifted in terms of exports. Exports are goods that
are manufactured in one country but sold in another. For example, we may run a
company in Malaysia that manufactures and sells our own apparel brand. To grow
our sales, we need to enter and advertise our clothing in other foreign countries such
as the United States and China. All of our clothing sales and shipments to the United
States and China are considered exports. As a result, the sales or profits made in
both countries must be converted to Malaysian Ringgit because they are foreign
currency, as opposed to US Dollar and Chinese Yuan. If both currencies lose value,
our total sales or earnings will become expensive.

Since the value of a country's currency is one of the most important indicators of
its economic performance and gross domestic product (GDP), devaluation can have
a substantial influence on the daily lives of its citizens It is critical for a country to
maintain an optimum balance of imports and exports. Import and export operations
can have an impact on a country's GDP, exchange rate, inflation, and interest rates.

In conclusion, Malaysia has a strong market position, which includes a healthy

current account surplus and a net external creditor position, has significantly
enhanced the country's ability to withstand external fluctuations and shocks as
evidenced by continuous export growth and competitiveness, sufficient foreign
reserves, and low inflation line relative to its peers in the region. All of this is
expected to cover the ringgit's continued decline.

3
REFERENCES

Anuradha Raghu, B. (24 May, 2022). Food protectionism spreads with Malaysia
poultry export ban. Retrieved from The Economic times News:
https://economictimes.indiatimes.com/news/international/world-news/food-
protectionism-spreads-with-malaysia-poultry-export-
ban/articleshow/91759283.cms
Fathiyah Ismail, N. F. (2021). International Financial Management. UiTM Cawangan
Dungun.
Ram, B. S. (23 April, 2022). MoF: Ringgit remains competitive, inflation in check
despite geopolitical tensions. ( New Straits Times Press (M) Bhd) Retrieved
24 May, 2022, from New Straits Times:
https://www.nst.com.my/news/nation/2022/04/791218/mof-ringgit-remains-
competitive-inflation-check-despite-geopolitical

4
APPENDICES

5
5/26/22, 12:59 PM Malaysia poultry export ban: Food protectionism spreads with Malaysia poultry export ban - The Economic Times

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Business News › News › International › World News › Food protectionism spreads with Malaysia poultry export ban

Food protectionism spreads with Malaysia poultry

export ban
By Anuradha Raghu, Bloomberg Last Updated: May 24, 2022, 11:42 AM IST
SHARE FONT SIZE SAVE PRINT COMMENT

Synopsis
Malaysia will halt exports of 3.6 million chickens a month from June 1, and investigate
allegations of cartel pricing, Prime Minister Ismail Sabri Yaakob said Monday. The move
is likely to hit hard in Singapore, which sources a third of its supply from Malaysia, as well
as in Thailand, Brunei, Japan and Hong Kong.

AP
Malaysia’s government met with the
country’s biggest poultry producers to
discuss subsidies and ensure
continuity of local supply as the nation
moved to ban exports of chicken in the
latest food protectionist move in the
region.

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Malaysia will halt exports of 3.6 million chickens a month from June 1, and
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said Monday. The move is likely to hit hard in Singapore, which sources a third
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domestic prices as nations around the world battle rising food costs, partly
driven by the war in Ukraine crimping food supplies. Indonesia recently TRENDING WORLD NEWS
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https://economictimes.indiatimes.com/news/international/world-news/food-protectionism-spreads-with-malaysia-poultry-export-ban/articleshow/91… 1/5
5/26/22, 12:59 PM Malaysia poultry export ban: Food protectionism spreads with Malaysia poultry export ban - The Economic Times

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The Singapore Food Agency said the restriction may result in temporary
disruptions to the supply of chilled chicken in the city-state, and urged
consumers to be open to switching to frozen chicken or other meat products. 3. WHO chief Tedros Adhanom
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About 34% of Singapore’s chicken imports were from Malaysia last year, it said, second five-year term

with almost all imported as live chickens and slaughtered and chilled in the
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“If the disruption to chicken supply is temporary, then it may be manageable,” Africa

said Selena Ling, head of Treasury Research & Strategy at OCBC Bank in
Singapore. “But if it’s persistent NSE -0.41 % and more worryingly, reflective Most Popular Opinion
of more protectionist measures by other countries over food security and
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The Malaysia Competition Commission is investigating reports that there are 2. The risk of the fisc that fuel cuts bring

cartels that control the price and output of chicken among large companies,
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“If it’s true these cartels exist, we will take legal action against them,” he said.
State news agency Bernama reported that there was a shortage of poultry Latest News
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Last week Ismail abolished the approved permit rules for imports of some food
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items including chicken, cabbage and evaporated milk to secure adequate food
supplies in the country. Malaysia imports about 60% of its food needs, and has
been impacted by higher import prices as well as the weakening ringgit. 3. In case you haven't noticed, private
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Malaysia’s food inflation is set to continue in the coming months amid

elevated global commodity prices, domestic supply chain disruptions and
depreciation of the local currency, researchers at MIDF Amanah Investment
Bank wrote in a note Monday. The country is highly exposed to global shocks
in the food supply chain given its status as a a net food importer, it said.

Farmers are already struggling with reduced weight gain among their
chickens on account of the quality of their feed, as well as diseases and
extremely hot weather, according to the Agriculture and Food Industries
Ministry. “This has affected the supply of chicken in certain areas,” it said in a
statement on Sunday.

https://economictimes.indiatimes.com/news/international/world-news/food-protectionism-spreads-with-malaysia-poultry-export-ban/articleshow/91… 2/5
5/26/22, 12:59 PM Malaysia poultry export ban: Food protectionism spreads with Malaysia poultry export ban - The Economic Times

In 2020, Malaysia exported poultry meat worth $18.9 million, making it the
49th largest exporter of the product in the world.

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