How Foreign Exchange Rates Affect Export & Import?

Life and everything in it is unpredictable, changes are a part of it, so are the monetary activities on which revolves the umpteen number of activities and competitions of populace. Changes in currency can affect the imports and exports of any country, just as what happens when Dollar is strong or weak in comparison to other currencies and how it affects trade.

Bangalore is one of the top metropolitan cities which provide lots of opportunities for technical jobs. People from different parts are migrating to Bangalore in search of better jobs which in turn increase the counters for doing foreign currency exchange in Bangalore. Fluctuating currency exchange rates also affects the import and export of this top technical city.

‘Imports’ and ‘Exports’ are often just terms uninteresting to the layman but a little effort is sufficient to understand the impact of currency exchange rates on our day to day lives, through the selection of purchases we make in our daily lives ranging from electronics to groceries where the market is open to an international level of competition. With a choice of world class quality products competing in the markets, it is a necessity to understand the intense impact on our regular purchases. The value of currencies between trading countries is vital in this context, which can affect businesses and in turn affect the goods and services you may choose on your daily errands.

Imports and Change in Currency Rates

Goods produced in an overseas country but sold in the domestic level is called Imports, by which the demand for a foreign product can be fulfilled only by first buying the currency of the said foreign country, followed by exchange of currency and only then the product in demand can be purchased.

A business man who has to make purchases from Japan for his shops in India has to pay in their respective currency for which he should first purchase the same from the foreign exchange market against the Indian currency and only then can he pay in their respective currency such as the Yen. Importing products of quality from countries like Japan and China will be less expensive when compared to the US Dollar. Paying companies in their countries’ respective currency will reduce the cost of the product further increasing the demand for imported products and also the currency required to buy the product. Conversely, while importing, if the value of the local currency happen to depreciate becoming weak, the imports will turn out to be more expensive making the products expensive. A strong Dollar increases or supports higher imports while on the other hand a weak Dollar drops the imports.

Exports and Change in Currency Rates

Goods produced within a country and sold in another country overseas is called Exports. This process of sale can be done with different countries to make better markets and higher profits. The countries with whom trade may be through is the choice of the trader.

It is important to be aware of how a strong dollar can influence the export business. While exporting, if the local currency happens to be strong with appreciation in value, the products on trade will become more expensive for the buyers especially if they are from England and Europe because the trader’s requirement of payment is in US dollars. At this juncture the European partners may find difficulty in purchasing sufficient dollars which in turn reduces the demand for the product, as the product becomes expensive. Thus depending on the strength or value of the dollar, the demand and supply of goods fluctuates.