Question

You are a US automobile producer with production mainly in China, and some in Portugal. The Coronavirus has caused there to be production disruptions in your China factory. What foreign exchange risks will you face? What are some of the other risks that you will have

Answer 1

It is said to be the world’s greatly pushed uncertainty situation due to coronavirus. The economic disturbances affected by the virus and the high anxiety are the risk seen in the economy which is indicated in the times of worse valuations in the economic markets. As the effect is uncertain, every country's economy is risked. So, designing policy should keenly address the problems due to the virus that doesn't affect the economy in the long run. Monetary policy will probably have a relatively restricted effect since interest rates are low and have been so for some time.

In this world, today every central bank is facing a challenge with a reasonable level of inflation and interest rates of more than 5 percent. If the virus hit domestic pressure, the bank would slash rates as required. Governments have to assist with the revised fiscal targets which would be difficult and risky. The risk of exchange or currency swings in the most affected countries like China, Italy, and many more which are slowly being trapped into the virus. Thus, this is a situation of global tension.

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