You have been appointed as an advisor to a renowned clothing distributor (VCL) in Australia (a fictitious company). The corporation holds a portfolio of well-known clothing brands that are protected by international patent law.

The company currently engages in export and import activities using a well-linked international network of agents. The company's product is distributed in Europe and a few Asian countries through its own retailing network. This network is operated by its subsidiaries established in those countries (France, China, and Japan).

The recent global health crisis, on the other hand, has had a severe impact on both the firm's operations and cash flow conditions. The firm's capacity to manage its cash flow positions has been hampered in particular by the considerable volatility of the local currency value in the foreign exchange market. In light of this, the corporation has opted to rethink its foreign trade and financial strategy. On this back ground, VCL requests your aid in refining their present foreign currency transaction strategy as a specialist in international finance and banking.

The firm currently invoices its exports in the currencies of its trading partners. Its foreign suppliers usually invoice in United State dollars. VCL is allowed four months to settle their suppliers' invoices. Its foreign buyers have been given 60 days to settle their invoices.

The fluctuation of foreign currency values against the AUD has forced the company to re-think its export invoicing policy. Because the company's overseas suppliers issue invoices in USD, the marketing manager advises utilising USD as the company's trading currency. Nonetheless, the production manager emphasised that invoicing both export and import in AUD would assist the company in eliminating all potential foreign exchange risks. The company's management has asked you to assess the strengths and drawbacks of all available options for dealing with the negative impact of currency fluctuations.

The company now sources clothing materials from China and India. According to a feasibility analysis performed last year, building a manufacturing facility in India would provide a significant cost benefit. Therefore, VCL plans to establish two new production sites in India and Bangladesh through the formation of two subsidiaries. The new facilities will be used to meet Europe's expanding demand for its branded items. Alternately, the marketing manager advises opening two buying offices in India and Bangladesh and sourcing clothing from small local producers. He stated that such a plan will assist the corporation in reducing its capital commitment on foreign investments.

VCL's policy is to review the cash flow situation of all its subsidiaries every three months and remit any excess cash balances to the head office in Australia. Currently, excess cash is transferred any time whenever the foreign subsidiaries' cash balances exceed the allowed limit. Consequently, the parent company in Australia transfers cash to the subsidiaries when they are in short of cash. my number data is:

Six-Months		Year	DATE	AUD/JPY	AUD/INR	AUD/USD	AUD/EUR	AUD/CNY	AUD/BDT
1	1		30/12/2019	75.0700	49.8440	0.6951	0.6222	4.8378	58.7632
1	1		6/01/2020	75.5400	48.9630	0.6901	0.6204	4.7740	58.3825
1	1		13/01/2020	75.6900	48.8430	0.6872	0.6195	4.7134	58.1371
1	1		20/01/2020	74.6100	48.6970	0.6828	0.6192	4.7362	57.7649
1	1		27/01/2020	72.5200	47.8670	0.6691	0.6031	4.6411	56.6059
1	1		3/02/2020	73.2100	47.7050	0.6672	0.6095	4.6706	56.4785
1	1		10/02/2020	73.6700	48.0160	0.6713	0.6196	4.6896	56.8255
1	1		17/02/2020	73.9400	47.6280	0.6627	0.6110	4.6558	56.0976
1	1		24/02/2020	70.3400	47.2120	0.6509	0.5902	4.5502	55.0987
1	1		2/03/2020	70.0400	49.2180	0.6651	0.5893	4.6090	56.3007
1	1		9/03/2020	66.7100	45.6470	0.6182	0.5565	4.3296	52.3306
1	1		16/03/2020	64.2400	43.7130	0.5798	0.5421	4.1137	49.0801
1	1		23/03/2020	66.5100	46.5270	0.6165	0.5532	4.3736	52.1991
1	1		30/03/2020	65.0200	45.7030	0.5995	0.5546	4.2509	50.7597
1	1		6/04/2020	68.8100	48.1460	0.6350	0.5802	4.4625	53.7189
1	1		13/04/2020	68.3900	48.6870	0.6364	0.5849	4.4979	53.8968
1	1		20/04/2020	68.6400	48.6920	0.6385	0.5899	4.5214	54.1193
1	1		27/04/2020	68.6000	48.6060	0.6418	0.5843	4.5305	54.4033
1	1		4/05/2020	69.6300	49.3000	0.6529	0.6023	4.6181	55.3398
1	1		11/05/2020	68.6400	48.6290	0.6414	0.5930	4.5548	54.3458
1	1		18/05/2020	70.3200	49.6270	0.6535	0.5994	4.6574	55.3711
1	1		25/05/2020	71.8600	50.3880	0.6666	0.6005	4.7561	56.4810
1	1		1/06/2020	76.3600	52.6490	0.6968	0.6173	4.9339	59.0399
1	1		8/06/2020	73.6600	52.1710	0.6862	0.6095	4.8586	58.2858
1	1		15/06/2020	73.0100	52.0940	0.6832	0.6111	4.8307	57.8875
1	1		22/06/2020	73.5500	51.8680	0.6860	0.6114	4.8548	58.1248
1	1		29/06/2020	74.5700	51.7740	0.6937	0.6166	4.9014	58.8535
2	1		6/07/2020	74.2700	52.2420	0.6948	0.6148	4.8629	58.8704
2	1		13/07/2020	74.8400	52.3810	0.6995	0.6120	4.8903	59.1987
2	1		20/07/2020	75.3700	53.0950	0.7103	0.6093	4.9820	60.1127
2	1		27/07/2020	75.6000	53.5050	0.7142	0.6062	4.9811	60.4427
2	1		3/08/2020	75.8000	53.6860	0.7157	0.6070	4.9863	60.5697
2	1		10/08/2020	76.4400	53.6920	0.7171	0.6055	4.9839	60.6882
2	1		17/08/2020	75.7500	53.6500	0.7161	0.6069	4.9539	60.6035
2	1		24/08/2020	77.5900	53.8560	0.7366	0.6186	5.0565	62.3385
2	1		31/08/2020	77.3500	53.3620	0.7279	0.6149	4.9809	61.6191
2	1		7/09/2020	77.3200	53.4790	0.7283	0.6147	4.9765	61.6360
2	1		14/09/2020	76.2100	53.6020	0.7289	0.6156	4.9328	61.6868
2	1		21/09/2020	74.2100	51.7680	0.7027	0.6040	4.7938	59.4695

2		28/09/2020	75.4300	52.4980	0.7162	0.6113	4.8635	60.6205
2		5/10/2020	76.4400	52.8520	0.7239	0.6120	4.8453	61.2637
2		12/10/2020	74.6200	51.9880	0.7080	0.6041	4.7409	59.9180
2		19/10/2020	74.7000	52.6770	0.7135	0.6014	4.7692	60.3835
2		26/10/2020	73.5200	52.3820	0.7026	0.6030	4.7017	59.2222
2		2/11/2020	74.9700	53.6680	0.7255	0.6109	4.7941	61.2104
2	1	9/11/2020	76.0400	54.1910	0.7268	0.6141	4.7997	61.3492
2	1	16/11/2020	75.8300	54.1150	0.7302	0.6158	4.7907	61.2638
2	1	23/11/2020	76.8900	54.6070	0.7386	0.6173	4.8554	62.3748
2	1	30/11/2020	77.2800	54.7350	0.7421	0.6121	4.8460	62.4700
2	1	7/12/2020	78.3500	55.5450	0.7533	0.6218	4.9300	63.6539
2	1	14/12/2020	78.7600	56.0900	0.7624	0.6219	4.9821	64.1788
2	1	21/12/2020	78.6300	55.8950	0.7599	0.6225	4.9704	64.2191
2	1	28/12/2020	79.5100	56.3320	0.7704	0.6345	5.0269	64.9216
3	2	4/01/2021	80.6400	56.8970	0.7759	0.6349	5.0240	65.4316
3	2	11/01/2021	80.0000	56.3170	0.7702	0.6375	4.9909	64.9125
3	2	18/01/2021	80.0700	56.3110	0.7716	0.6341	5.0007	64.9301
3	2	25/01/2021	80.0000	55.6930	0.7642	0.6296	4.9100	64.4756
3	2	1/02/2021	80.8800	55.8960	0.7677	0.6373	4.9643	64.5098
3	2	8/02/2021	81.3500	56.2710	0.7753	0.6396	5.0039	65.2958
3	2	15/02/2021	82.9600	57.0900	0.7869	0.6492	5.0798	66.3121
3	2	22/02/2021	82.1200	56.9550	0.7705	0.6379	4.9874	65.1997
3	2	1/03/2021	83.2700	56.2460	0.7686	0.6449	4.9928	65.0389
3	2	8/03/2021	84.6400	56.4360	0.7765	0.6495	5.0535	65.2027
3	2	15/03/2021	84.2900	56.0530	0.7742	0.6503	5.0377	65.1412
3	2	22/03/2021	83.7100	55.4380	0.7636	0.6473	4.9942	64.1569
3	2	29/03/2021	84.1800	55.8050	0.7606	0.6464	4.9930	64.0425
3	2	5/04/2021	83.5600	56.9460	0.7621	0.6402	4.9934	64.1383
3	2	12/04/2021	84.1100	57.6340	0.7733	0.6451	5.0421	65.1737
3	2	19/04/2021	83.5800	58.0260	0.7745	0.6400	5.0300	65.1897
3	2	26/04/2021	84.3100	57.1370	0.7716	0.6418	4.9946	65.0304
3	2	3/05/2021	85.1600	57.4440	0.7842	0.6446	5.0432	66.0924
3	2	10/05/2021	84.9800	56.9610	0.7772	0.6400	5.0026	65.3314
3	2	17/05/2021	84.2300	56.3020	0.7731	0.6347	4.9747	65.1491
3	2	24/05/2021	84.7500	55.8420	0.7713	0.6325	4.9112	65.0052
3	2	31/05/2021	84.7100	56.3720	0.7737	0.6358	4.9474	64.9985
3	2	7/06/2021	84.5000	56.4390	0.7706	0.6363	4.9293	64.9924
3	2	14/06/2021	82.3900	55.4050	0.7477	0.6302	4.8245	63.1433
3	2	21/06/2021	84.0300	56.2960	0.7586	0.6355	4.8964	63.8741
3	2	28/06/2021	83.5400	56.0700	0.7525	0.6342	4.8703	63.4659

4		5/07/2021	82.4400	55.7520	0.7485	0.6302	4.8494	62.9638
4		12/07/2021	81.4400	55.2230	0.7402	0.6268	4.7954	62.7690
4		19/07/2021	81.4200	54.8210	0.7364	0.6256	4.7738	61.9775
4		26/07/2021	80.5600	54.5930	0.7344	0.6186	4.7449	61.8732
4		2/08/2021	81.0700	54.5890	0.7353	0.6251	4.7666	61.8902
4		9/08/2021	80.7400	54.7070	0.7369	0.6248	4.7728	61.9586
4	2	16/08/2021	78.3300	53.0390	0.7134	0.6098	4.6380	60.2680
4	2	23/08/2021	80.2900	53.7140	0.7311	0.6197	4.7310	62.0777
4	2	30/08/2021	81.8400	54.4300	0.7458	0.6276	4.8125	63.3781
4	2	6/09/2021	80.8500	54.0720	0.7355	0.6224	4.7396	62.1424
4	2	13/09/2021	79.8900	53.4990	0.7265	0.6194	4.6972	61.5636
4	2	20/09/2021	80.3800	53.5880	0.7258	0.6196	4.6943	61.4269
4	2	27/09/2021	80.5800	53.7890	0.7256	0.6256	4.6766	61.8647
4	2	4/10/2021	81.9900	54.8770	0.7306	0.6314	4.7076	62.2471
4	2	11/10/2021	84.7900	55.6820	0.7421	0.6398	4.7760	63.1475
4	2	18/10/2021	84.6900	55.9760	0.7464	0.6406	4.7649	63.6381
4	2	25/10/2021	85.7400	56.3440	0.7521	0.6503	4.8172	64.2369
4	2	1/11/2021	83.9300	54.8960	0.7401	0.6397	4.7352	63.1971
4	2	8/11/2021	83.4700	54.5080	0.7332	0.6401	4.6769	62.7399
4	2	15/11/2021	82.4500	53.7720	0.7234	0.6407	4.6198	61.8507
4	2	22/11/2021	80.7000	53.4510	0.7123	0.6292	4.5533	61.0014
4	2	29/11/2021	78.9700	52.6650	0.7001	0.6186	4.4637	59.8165
4	2	6/12/2021	81.3000	54.2790	0.7171	0.6338	4.5669	61.3121
4	2	13/12/2021	80.9800	54.1320	0.7124	0.6337	4.5414	60.8176
4	2	20/12/2021	82.6400	54.1540	0.7223	0.6380	4.5990	61.8072
4	2	27/12/2021	83.5500	54.0630	0.7260	0.6384	4.6116	62.1601
5	3	3/01/2022	82.9400	53.3120	0.7178	0.6317	4.5773	61.5083
5	3	10/01/2022	82.2900	53.4330	0.7206	0.6311	4.5775	61.8347
5	3	17/01/2022	81.6600	53.4290	0.7183	0.6332	4.5529	61.6732
5	3	24/01/2022	80.5100	52.4190	0.6986	0.6267	4.4434	59.9818
5	3	31/01/2022	81.5200	52.8150	0.7076	0.6180	4.5007	60.6413
5	3	7/02/2022	82.3500	53.7400	0.7135	0.6285	4.5336	61.1969
5	3	14/02/2022	82.4900	53.5610	0.7173	0.6334	4.5370	61.5228
5	3	21/02/2022	83.5700	54.2830	0.7232	0.6416	4.5684	62.1590
5	3	28/02/2022	84.5900	56.3140	0.7370	0.6744	4.6570	63.1904
5	3	7/03/2022	85.5000	55.7560	0.7290	0.6680	4.6211	62.5628
5	3	14/03/2022	88.3400	56.3760	0.7415	0.6708	4.7153	63.6851
5	3	21/03/2022	91.6800	57.3020	0.7512	0.6838	4.7820	64.6182
5	3	28/03/2022	91.8600	56.9720	0.7499	0.6782	4.7712	64.5739
5	3	4/04/2022	92.6800	56.6120	0.7455	0.6852	4.7421	64.1279

5		11/04/2022	93.4600	56.4430	0.7397	0.6843	4.7123	63.5698
5		18/04/2022	93.0500	55.3420	0.7238	0.6704	4.7054	62.2613
5		25/04/2022	91.7000	54.0460	0.7063	0.6698	4.6672	60.9961
5		2/05/2022	92.4000	54.4620	0.7077	0.6705	4.7169	60.9896
5		9/05/2022	89.6400	53.7560	0.6939	0.6663	4.7102	60.0987
5		16/05/2022	89.9200	54.7520	0.7033	0.6658	4.7066	61.2856
5	3	23/05/2022	91.0100	55.5580	0.7160	0.6672	4.7958	62.7431
5	3	30/05/2022	94.2900	55.9130	0.7206	0.6721	4.7989	64.0037
5	3	6/06/2022	94.7800	55.0790	0.7051	0.6703	4.7299	65.4403
5	3	13/06/2022	93.5700	54.0320	0.6930	0.6602	4.6562	64.3173
5	3	20/06/2022	93.9200	54.3540	0.6948	0.6581	4.6467	64.3593
5	3	27/06/2022	92.1200	53.7820	0.6814	0.6533	4.5654	63.6768
6	3	4/07/2022	93.3100	54.3490	0.6856	0.6731	4.5904	63.8935
6	3	11/07/2022	94.0900	54.1730	0.6792	0.6731	4.5890	63.7769
6	3	18/07/2022	94.2100	55.2820	0.6925	0.6780	4.6744	65.3097
6	3	25/07/2022	93.0300	55.4160	0.6985	0.6833	4.7102	65.9663
6	3	1/08/2022	93.2500	54.8300	0.6909	0.6784	4.6710	65.2486
6	3	8/08/2022	95.0500	56.7120	0.7121	0.6939	4.8013	67.5854
6	3	15/08/2022	94.1000	54.9210	0.6872	0.6846	4.6842	65.2428
6	3	22/08/2022	94.7500	55.0930	0.6890	0.6914	4.7345	65.2690
6	3	29/08/2022	95.4500	54.2870	0.6808	0.6841	4.6979	64.5535
6	3	5/09/2022	97.5000	54.4780	0.6841	0.6812	4.7367	64.9279
6	3	12/09/2022	96.0400	53.5490	0.6720	0.6707	4.6905	69.7536
6	3	19/09/2022	93.5400	53.0320	0.6527	0.6733	4.6515	66.9670
6	3	26/09/2022	92.6700	52.1820	0.6402	0.6531	4.5541	64.7242
6	3	3/10/2022	92.5500	52.7400	0.6368	0.6535	4.5299	65.5267
6	3	10/10/2022	92.1600	51.0180	0.6196	0.6373	4.4546	63.1372
6	3	17/10/2022	94.1500	52.6290	0.6377	0.6465	4.6169	64.5352
6	3	24/10/2022	94.5300	52.7380	0.6411	0.6432	4.6479	64.8152
6	3	31/10/2022	94.7900	52.9970	0.6466	0.6489	4.6443	65.7592
6	3	7/11/2022	93.0200	53.9360	0.6702	0.6472	4.7628	68.1593
6	3	14/11/2022	93.6300	54.4470	0.6671	0.6461	4.7492	68.4445
6	3	21/11/2022	93.8800	55.1290	0.6749	0.6490	4.8351	68.6373
6	3	28/11/2022	91.1800	55.2690	0.6789	0.6440	4.7652	69.3836
6	3	5/12/2022	92.7900	55.9980	0.6795	0.6451	4.7265	69.7847
6	3	12/12/2022	91.3600	55.2810	0.6684	0.6314	4.6593	69.5804
6	3	19/12/2022	89.2000	55.6030	0.6717	0.6326	4.6938	70.6628
6	3	26/12/2022	89.3300	56.3550	0.6813	0.6364	4.6991	69.8333

so my questions are: Identify factors that affect the value of a given currency. How can the understanding of such factors be useful in managing cash flows in foreign currency?

2. Identify the type of foreign exchange rate exposure VCL faces.
4. Evaluate the costs and benefits of the current and the proposed international invoicing policy of VCL. Can any of those polices avoid the possible adverse impact of FX rate risk?
6. Choose three currencies (including USD) form the given and plot them on a a line chart and identify any significant currency value movements in AUD. Briefly explain the probable causes for any significant movements of AUD value (you need to provide justification).
8. Use the information you gathered on charts to justify your explanations on the current and the proposed international invoicing policy of VCL.
10. Identify alternative internal and external foreign exchange risk management (hedging) strategies which VMSL can use to mitigate the FX risk exposure they are facing in the short-run and the long run. You need to briefly explain the possible advantages and disadvantages of each strategy you have identified.
12. Estimate the following for exchange rates which you have used for the part 2. You are required to present and interpret the summary statistics (not all data) in your Witten assignment. You need separately submit a EXCEL worksheet with all your detailed calculations with excel functions or formulas you used.
    1. 
       
       2. The weekly exchange rate changes (percentage changes)
       4. Averages, standard deviations, and correlation matrix for weekly exchange rate changes for the whole period (starting with 01/01/2020)
       6. Averages and standard deviations for weekly exchange rate changes for each six-month period (starting with 01/01/2020)
       8. Averages and standard deviations for weekly exchange rate changes for each 12-month period (starting with 001/01/2020)
       10. Correlation of weekly foreign exchange rate changes among three currencies in each 6-month and 12-month periods (starting with 001/01/2020)
       12. Estimate value at risk (VaR) in 95% probability under all the time horizons you sued for calculating averages and standard deviations. Use the estimated VaRs to explain the foreign exchange rate exposures faced by VCL.
       14. Use the estimated VaR to illustrate the probable foreign exchange exposure of the company on its allowed customer credit period and the proposed credit period. Explain.
       16. Critically evaluate movements of estimated average and standard deviation values and the correlation coefficients over the time. How such movements are important in managing foreign exchange risk.