Financial Analysis of Embraer Company

The Effect of Global Financial Funds on the Volatility of the Brazil Financial Market

The existence of global financial funds affects the volatility of Brazil financial market through significant decisions made about the financial situation of the globe. The paper designs financial analysis on the Brazil market that produces negative results as per the currency strength between the country and other nations.

Factors Affecting the Volatility of the Real

Large global financial fund decisions, for example, the ability to provide financial aid or dynamics associated with currency valuation and devaluation affect the volatility of the Real. Internal political difficulties as the corruption claims against the previous president of Brazil resulted into investors losing confidence in investing in the nation, thereby, affecting the volatility of the currency in the negative direction (Eiteman, Stonehill & Moffett, 2016). Internal inflation and Internet rates figures affect the volatility of the financial market. For example, increased rates and unmanaged inflation rate contribute to the loss of investors’ confidence concerning investing in Brazil. Recession and unemployment detail the current situation of the economic situation of the country. Recession means that the currency of Brazil is devalued and it creates a situation that results in reduced investments and unemployment rates.

Hedging Strategies of Embraer Company

The appreciation of the Real against U.S dollars translates into a reduced cost of purchasing parts used in the construction of jets by Embraer Company. Appreciation of Real means depreciation of U.S dollar, a situation that leads to losses in the sale of jets as the market prices are figured in U.S dollars. Embraer Company is exposed to market hedging of the currency because of its production and sales dynamics involving the Real and U.S dollar respectively. The company can reduce the risk by cutting down on currency hedging and creating a system that balances the volatility of the Real and the U.S dollar (Hill & Hult, 2017). The decision taken by Embraer Company of foreign exchange from 2000 to 2008 was strategic in ensuring the company against financial risks, but the poor forecasting of the behavior of the market affected the currency bet, the company placed on Real and U.S dollar currency behavior.

The Impact of International Financial Funds and Internal Factors on Currency Volatility

In conclusion, the dynamics associated with the international financial funds affects the volatility of currency across the globe. Such dynamics contributes to different financial effects on companies like Embraer Company. The internal aspects of a nation’s political, inflation, interest rates, and employment elements affect the volatility and the direction of a nation’s currency.

References

Eiteman, D. K., Stonehill, A. I., & Moffett, M. H. (2016). Multinational business finance. Pearson Higher Ed.

Hill, C. W. L & Hult, G. T. M. (2017). International Business: Competing in the global marketplace (11th ed.). New York, NY: McGraw Hill Education. (Print ISBN: 978-1259578113; Digital ISBN: 978-1259706431)