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Exchange rate fluctuations

Why Should You Be Aware of Exchange Rate Fluctuations?

Global currency performance is a matter of great relevance and curiosity to businesses, economic growth, travel, international education, exporters, importers and many more critical sectors. The global currency market helps to facilitate foreign trade. It enables companies to sell goods in the global market and get paid in their local currency. The forex market is one of the largest as well as flexible markets in the world.

The exchange rate that you see today might not be the same tomorrow. Exchange rate is influenced by a country’s economic performance, inflation, interest rate differentials, capital flows etc. The fluctuations of a country’s currency impacts economy, consumers, international travel, importers, exporters, businesses, and remittance flows. Whenever a country’s currency appreciates or depreciates, it will have both positive and negative impacts on a country’s economy, depending on the sector.

How Does the Exchange Rate System Work?

For example, if an American is travelling to any European country wants to know the price of the exchange rate. On the other hand, if a German travelling to any American country wants to know the exchange rate. Both the cases are simply reciprocal of each other. Because the dollar cost 0.80 euros and the euro will cost the US $1.20. Now what matters here is the economic parameters of the countries.

In addition, the interest rates in both countries matter. The price level in both countries matter, the political risks matter, and so on. Europe and the United States, both with different conditions, make things even trickier. Maybe one fine day everything was just stable in Europe and tell when the United States started having significant changes in exchange rate because of major events. Directly, or indirectly currency plays a key role in domestic market growth.

Impact of Currency Exchange Fluctuations

International Trade – It is one of the most affected due to foreign exchange fluctuations. Generally, a weaker currency stimulates exports and makes imports expensive. Strong currency is not always good, an unjustifiable strong currency can affect the economy in the long run causing job losses, and rendering industries uncompetitive.

Consumer – A stable currency is best for the consumer as it allows them to buy more. However, when there are fluctuations it affects buying capacity. Gas prices cause one of the major impacts on consumers and as a chain reaction affects transportation of goods, movement between nations and states and the brunt of it has to be borne by the consumer. Also, when currency is weak, it increases cost of imports and the consumer has to bear this cost.

Business – Currency fluctuation are important to study for any businesses. It can impact the bottom line of a company. If the dollar weakens against the rupee it can affect companies who have headquarters in the US. Whereas, if dollar performs strongly against the rupee the same company will see an increase in its profits.

International Remittances have a direct impact on the steady flow of foreign currency into the country. It benefits the economy and individuals. Expats, international students, travellers, travel agents, importers, exporters all keep a constant eye on the exchange rate fluctuations as they can gain or lose due to currency exchange fluctuations.

It is often misguided that exchange rates are solely related to trade flows that are import and export. The reason being is that a small fraction of the currency trades support exports and imports but not more than that tiny fraction. Some businesses are supported, and their flows of financial capital are significant worldwide, but the tiny fraction doesn’t make a big difference.

Conclusion Whether you are in business, a traveller, an international student or an individual wanting to exchange currency, buy or sell currency make sure you go to authorised money changer near you. For people residing in Noida or Delhi, you can visit foreign currency exchange company in Noida to get the best exchange rate value. It is important to understand how foreign currency fluctuations work and its impact on our lives and business activities.

Why Should You Be Aware of Exchange Rate Fluctuations?

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