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Foreign Exchange Market Rates

In: Business and Management

Submitted By tconner1
Words 585
Pages 3
The foreign currency exchange rate is an extremely dynamic market that affects all American companies operating internationally. In the recent years, the US Dollar has been under a systematic assault resulting in a decline in its value across the major world currencies. “This assault has included vocal countries, China for example, in demanding that the US Dollar be removed as the standard international currency” (Batson, 2009, pg.1). The foreign exchange rate of a currency is a general measurement of the financial health of a country, though the rates of exchange are not tied specifically to financial measurements. Therefore, a stronger dollar will benefit Americans more than a weaker dollar. One of the blessings in disguise maybe the value of the trade deficits that US has with a foreign country like China, it may decrease because Americans are not able to purchase more of the imported goods as their costs increase. The decline in the dollar’s value has benefited some American companies. US companies that export to places where the dollar is declining has seen an increase in their bottom line. “Foreigners buying US products in their own currency are able to buy more products as the US products are cheaper” (Salvatore, 2007, p. 346). The downfall of a drop in the dollar versus foreign currencies is the affects that the depreciation has upon US importers and Americans traveling abroad. For US importers, the cost of goods increases because it takes more dollars to buy the same product. In addition, for Americans living or traveling abroad all of the items purchased is going to be more expensive. American and foreign companies can hedge against changes in foreign exchange rates. Large multinational organizations can build factories and assembly plants closer to the raw materials, cutting down on transportation costs and providing the ability to pay for the raw...

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