What important thing you must remember when you are dealing with problems about monetary values in different currencies?
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Answers
Step-by-step explanation:
Currency fluctuations have a significant impact on the consumer. ... For example, buying a foreign car might get more expensive if your country's currency depreciates, which means that you might end up paying more money to get an item of the same value. On the other hand, a stable currency allows consumers to buy more.People also ask
Why is it important to understand currency fluctuations?
Currency fluctuations have a significant impact on the consumer. ... For example, buying a foreign car might get more expensive if your country's currency depreciates, which means that you might end up paying more money to get an item of the same value. On the other hand, a stable currency allows consumers to buy more
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Step-by-step explanation:
Currency fluctuations are a natural outcome of floating exchange rates, which is the norm for most major economies. Numerous factors influence exchange rates, including a country's economic performance, the outlook for inflation, interest rate differentials, capital flows and so on. A currency's exchange rate is typically determined by the strength or weakness of the underlying economy. As such, a currency's value can fluctuate from one moment to the next.
PART OF
Global Trade Guide
ECONOMY ECONOMICS
Currency Fluctuations: How they Affect the Economy
By TROY SEGAL
Reviewed by ROBERT C. KELLY on June 04, 2021
Fact checked by MICHAEL LOGAN
TABLE OF CONTENTS
EXPAND
Far-Reaching Currency Impacts
Currency Impact on the Economy
Global Impact of Currencies: Examples
How Can an Investor Benefit?
The Bottom Line
Currency fluctuations are a natural outcome of floating exchange rates, which is the norm for most major economies. Numerous factors influence exchange rates, including a country's economic performance, the outlook for inflation, interest rate differentials, capital flows and so on. A currency's exchange rate is typically determined by the strength or weakness of the underlying economy. As such, a currency's value can fluctuate from one moment to the next.
KEY TAKEAWAYS
Currency exchange rates can impact merchandise trade, economic growth, capital flows, inflation and interest rates.
Examples of large currency moves impacting financial markets include the Asian Financial Crisis and the unwinding of the Japanese yen carry trade.
Investors can benefit from a weak greenback by investing in overseas equities. A weaker dollar can boost their returns in U.S. dollar terms.
Investors should hedge their foreign currency risk via instruments such as futures, forwards and options.