Exchange rate

THE EXCHANGE RATE

The exchange rate expresses the national currency's quotation in respect to foreign ones. Levels and fluctuations in the exchange rate exert a powerful impact on exports, imports and the trade balance. A high and rising exchange rate tends to depress exports, to boost import and to deteriorate the trade balance, as far as these variables respond to price stimuli. Consumers find foreign goods cheaper so the consumption composition will change. Similarly, firms will reduce their costs by purchasing intermediate goods abroad. Currency crisis have a sweeping impact on income distribution. So being aware of the rate’s changes and keeping up to date can influence the situation of a company very much.