As the factors that determine the value of a currency change, exchange rate fluctuations occur. They change over time.Įxchange rates are set in the global financial marketplace where banks and other financial institutions trade currencies 24/7. An important thing to note, however, is that exchange rates are not static.
The value of a currency is determined based on an assessment of a country’s economy, political situation, international trade, and interest rates, as well as market sentiment. Dollar (USD) is said to be 1 to 0.75, it means one Canadian dollar is worth 75 cents in U.S. For example, if the exchange rate between the Canadian Dollar (CAD) and the U.S. Quite simply, a currency exchange rate is a measure of the value of one currency compared to the value of another. Understanding foreign currency exchange rates is essential to doing business in the international market. As such, we will be discussing what exchange rates are, how they affect international businesses, and how companies can make the most of exchange rate fluctuations. With international businesses and markets being as connected as they are, understanding foreign currency exchange rates and their implications for international business is essential. Yet, these same businesses must now also deal with the complexities associated with different global markets. Because of this interconnectedness, international businesses have access to a much wider customer base, as well as the opportunity to compare goods and services from around the world.
Globalization has largely been a blessing to business owners, as it has introduced them to an international business landscape they otherwise would never have been exposed to.
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