8.0 The Impact of Exchange Rate on The Multinational corporations.
The fluctuation of exchange rate plays an important role in multinational corporations since
they are depending on each other as shown in the correlation analysis and the interrelation
between exchange rate and balance of payment Kuwait. Therefore, in this analysis, it will
examine the impact of exchange rate from the year 2005 until 2019 of Kuwait (KWD) over
five major currencies (USD, GBP, JPY, EUR, CNY) effected Kuwait multinational
corporations where export and import were happened between countries.
a. United States of America (USD) & Kuwait (KWD)
4.0000
3.8000
3.6000
3.4000
3.2000
3.0000
USD/KWD
Jan-05
Oct-05
Jul-06
Apr-07
Jan-08
Oct-08
Jul-09
Apr-10
Jan-11
Oct-11
Jul-12
Apr-13
Jan-14
Oct-14
Jul-15
Apr-16
Jan-17
Oct-17
Jul-18
Apr-19
Exchange Rates
Exchange Rates Movement USD/KWD
Graph 8.1: Exchange rate movement USD/KWD
As we can see from graph 8.1 above, the highest exchange rate between USD over KWD were
during 2008 where the yearly average was USD3.7184/KWD. It is well known that 2008 was
the beginning of Global Financial Crisis and the main player was United State. Hence, United
State economy were in a poor condition which gave advantage to Kuwait currency. As a matter
of result, United State American find Kuwaiti goods and raw materials more expensive and
Kuwaiti would see United American goods and raw materials to be cheaper because of the
increase in exchange rate between USD over KWD.
In the data sources of Observatory of Economic Complexity (OEC) (Simoes & Hidalgo,
2011), shows increasement in the total of import from 2007 to 2008 which is
US$2,634,696,584 to US$2,802,015,025. However, having a downturn in 2009 to
US$1,806,823,180 since the exchange rate of USD to KWD facing a huge downfall which is
to USD3.4690/KWD where Kuwait currency value decrease against United States since
KWD1 only equal to USD3.4690 compare to 2008 where KWD1 equal to USD3.7184 yearly
average. Increase in price of USD goods and materials, decrease the demand from Kuwaiti.
On the side of export, if the exchange rate of USD over KWD increase, Kuwaiti would
increase their export because their price of goods and raw materials have more value at that
current situation.