An Analysis of International Finance Issues & Vodafone

Title: Vodafone Exchange Rate Report 2011

1.0 Introduction 2
2.0 Aims and Objectives 2
3.0 Company Profile 3
4.0 Euro Exchange Rate Forecast 4
4.1 Purchasing Power Parity 4
4.2 Interest Rate Parity 6
4.3 International Fisher Effect 7
4.4 Forward Rate Forecasting 8
4.5 Summary Forecast 9
5.0 Yield Curve Analysis 9
6.0 Nature of exposures 12
6.1 Pre-Transaction Exposure 12
6.2 Transaction Exposure 12
6.3 Translation Exposure 13
6.4 Economic Exposure 13
7.0 Hedging Strategies 14
7.1 Vodafone 2011 Figures 14
7.2 Vodafone Hedging Policy 15
8.0 Conclusions & Recommendations 17
9.0 Bibliography 18
10.0 References 18

  1.0 Introduction
With many large companies now trading globally to take advantage of new markets and cheaper labour, it is essential to consider potential foreign exchange risks that these companies face. To protect their bottom line profits, it is imperative that a company’s exposure to exchange rate movements is limited. To enable the company to limit this exposure and risk, both the factors that influence the exchange rate and limiting measures must be understood.
  2.0 Aims and Objectives
To allow a detailed analysis to be carried out, this report is going to focus on Vodafone PLC, and investigate their foreign exchange exposure. The ways in which Vodafone attempt to limit this exposure will also be discussed. Therefore, the aims of this report are as follows:

  * Identify the foreign currencies which Vodafone PLC trade in;
  * Forecast the 2 year movement of the currency which Vodafone are primarily exposed to, against their home currency, GBP;
  * Analyse the current shape of the UK yield curve and discuss it’s determinants and implications;
  * Analyse the UK yield curve with consideration to Vodafone and their future financing expectations;
  * Discuss the nature of Vodafone’s exposure to foreign currencies;
  * Identify and discuss the strategies...