(a) Discuss the different categories of foreign exchange risk and the techniques to reduce

those foreign exchange risks. (10 marks)

(b) You are a Manager of an international business firm in Australia. Your firm has

exported some goods in Japan, the export earning 1,000,000 is receivable by the next 3

months. Current exchange rate is $1 = 120. You expect that the Japanese Yen may

appreciate to $1 = 100 by the next 3 months.

Required:

(i) Explain the implication(s) to your business if Yen appreciates.

(ii) Except buying forward and using swaps, explain the collection strategy you will take

to minimise your business risks due to the expected change in the exchange rate.