Page 28 University of Technology, Jamaica Notes to the Financial Statements 31 March 2020 (expressed in Jamaican dollars unless otherwise indicated) 3. Financial Risk Management (Continued) (c) Market risk (continued) Currency risk (continued) Foreign currency sensitivity The following tables indicate the currencies to which the University had significant exposure on its monetary assets and liabilities and its forecast cash flows. The change in currency rate below represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis represents outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a reasonably expected change in foreign currency rates. The sensitivity of the surplus was primarily as a result of foreign exchange gains and losses on translation of receivables, payables, cash and cash equivalents, and investments. Effect on Surplus % Change in Currency Rate Effect on Surplus % Change in Currency Rate 2020 $’000 2020 2019 $’000 2019 Currency: USD – Revaluation (21,681) 2% (58,759) 4% USD – Devaluation 65,042 -6% 88,139 -6% CAN – Revaluation (17) 2% (32) 4% CAN – Devaluation 51 -6% 47 -6% STG – Revaluation (1,370) 2% (1,961) 4% STG – Devaluation 4,111 -6% 2,942 -6% EURO – Revaluation (1,080) 2% (1,812) 4% EURO – Devaluation 3,239 -6% 2,717 -6% Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Floating rate instruments expose the University to cash flow interest rate risk, whereas fixed interest rate instruments expose the University to fair value interest rate risk. The University manages its interest rate risk by matching, where possible, the duration and profile of financial assets and liabilities to minimise the impact of interest rate movements where there are mismatches. Typically, the University enters into fixed rate investment and loan contracts, thereby minimising its exposure to interest rate risk. University of Technology, Jamaica 144
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