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Fig 1: Exchange Rates (Fluctuations (Affect business performance, Restrict…
Fig 1: Exchange Rates
Currency = strong
:red_cross: for importers
Prices >
Pass the cost on to customers
Less competitive
Inflation >
Currency = weak
:red_cross: for exporters
< quantity of exports
Cheaper for foreign customers
Fluctuations
Affect business performance
Restrict market size e.g. just focus on domestic market
External factors lead to instability
Caused by supply/demand
Government interventions
Makes planning difficult
Change in interest rates
Speculators/gossip
Increase in overseas incomes = >demand in products
Recession
Trading in multiple currencies
Squeezed in both directions
Exchange rate = price of one currency vs another
Reference: Jones & Sloman, (2014)