I want to understand how changes in currency exchange rates can impact a country's exports. Specifically, how does the strengthening or weakening of a currency against other currencies affect the cost and competitiveness of exported goods?
5 answers
Sun Jan 12 2025
A country's currency exchange rate often reflects the balance between its exports and imports.
Sat Jan 11 2025
When a nation's exports grow faster than its imports, it signifies a positive trend for its currency. This is because higher exports indicate a greater demand for the country's currency in the international market.
Sat Jan 11 2025
The increased demand for a currency typically leads to its appreciation in value. This appreciation can make the country's exports less competitive in foreign markets, but it also makes imports cheaper for domestic consumers.
Sat Jan 11 2025
Inflation, interest rates, and forex rates are interconnected economic indicators. Each of these factors has a direct impact on the other two.
Sat Jan 11 2025
For instance, higher inflation can lead to an increase in interest rates, as central banks may try to curb price rises by tightening monetary policy. This, in turn, can affect the country's forex rates.