Dealing with fluctuating exchange rates

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A manufacturing company plans to convert EUR500 million into JPY to buy operational equipment in Japan. In a bank, there is a quote for the Rupiah exchange rate against JPY of Rp. 112/Rp. 107 (Sell/Buy). Meanwhile, the quoted exchange rate for the Rupiah against the EUR is IDR 15,500/IDR 15,100 (Sell/Buy). High inflation in Europe has led to the weakening of the EUR currency against the currencies of countries in Asia.

1. Is it profitable to transact across countries amid these conditions? How much funds in JPY to get?

2. Explain what alternative strategies should be taken by the company for the long term in dealing with fluctuating exchange rates?

Reference no: EM133306766

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