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Exchange Rate

The price of one country's currency in terms of other currencies.

An exchange rate is the price of one country's currency expressed in terms of another country's currency. It's an important factor in international trade because it determines the relative prices of goods and services when exchanged across borders. Exchange rates can have a significant impact on businesses in a number of ways, including:

  • Cost of imports and exports: A company's costs for importing or exporting goods can change when exchange rates fluctuate. For example, if a company's home currency weakens against the currency of its supplier country, the company's costs for imported goods will increase.
  • Competitive advantage: A favorable exchange rate can give a company's goods and services a competitive advantage in international markets.
  • Profitability: A company's profits can be affected by changes in exchange rates, as exchange rate movements can affect the cost of goods, the demand for the company's products, and the value of profits earned in foreign currencies.

See also

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