An exchange rate is the price of one currency expressed in terms of another currency
The exchange rate determined how much of one currency has to be given up in order to buy a currency has to be given up in order to buy a specific amount of another country
S - strong
P - pound
I - imports
C - cheap
E - exports
D - dear
W - weak
P - pound
I - imports
D - dear
E - exports
C - cheap
Ways that exchange rates impact business activity?
Price of exports in international markets
Cost of goods bought from overseas
Revenues and profits earned overseas
Converting cash receipts from customers overseas
What might cause an increase in the exchange rate?
Increasing demand for exports = higher demand for the currency
Lower demand for imports = lower demand for the currency
Speculation - traders may bet that the exchange rate will rise
An increase in interest rates - making it more attractive to hold the currency
Foreign direct investment into the country = higher demand for the currency
Who are the winners of a lower exchange rates?
Foreign buyers
Businesses exporting into international markets
Businesses earing substantial profits overseas
Who are the losers from a lower exchange rate?
Businesses importing goods and services
Overseas businesses trying ti compete in domestic markets
