Does Your Business Go Up And Down With The Dollar?
Everyone has heard about the dollar value going up or down at some point in their lives. Even if you have zero interest in commerce, the term might still ring a bell. So what is it all about? How does the value of the dollar increase or decrease? Does it impact businesses? Read on to find out.
Though there are many other factors that indicate a country’s economic status, the exchange rate is the most important one. In simple terms, the exchange rate is the amount of a particular currency in respect to another. So for e.g., if the exchange rate of dollar-euro is $0.90, then it means that you need to pay $0.90 in order to buy €1.
What affects exchange rates?
The following are the major factors that affect the exchange rate of a currency.
- The interest rate of its central bank
- Printing of excess money which leads to inflation
- The economic health of the country
- The financial stability of the country
What happens to businesses in case of dollar value fluctuations?
- When the dollar value increases there is a proportionate increase in the value of exports. As the export products become expensive, there is a cut back on the purchase by its customers from other countries. Thus the increase in dollar value can have a negative impact on businesses, especially in the manufacturing sectors.
- Businesses overseas are also impacted by a stronger dollar. As multinational companies make a lot of profit overseas, when the dollar value increases automatically it reduces their profit margin.
- But some overseas businesses may also benefit from a stronger dollar. This is because it makes their products cheaper to buy. So it can actually improve their sales and increase profits.
- A decrease in dollar value can be a good thing for some American business as they can sell their products for a lower price abroad.
- A falling dollar also reduces interest rates on loans which increases borrowing and finally results in higher interest rates
So is there any way for businesses to protect themselves?
Fortunately, businesses can protect themselves with the use of trading software that has become popular in the recent years. Automatic trading software like Fintech Ltd. is like your personal trading assistant that will work 24/7 to trade on your behalf.
The best thing about this software is that they increase your odds of returns through a carefully designed algorithm that keeps track of the changes in the market. You can choose everything from how many trades you want to invest into the limit on such trades to the amount invested etc. What’s even better? Even beginners can use it. All you need to do it register, pay online and start using the software. It’s that easy.