Exchange Rates

Exchange Rates

1. Exporters receive foreign currency e.g when they sell goods abroad they get €1 for $1

   • Value of euro falls e.g €1 = $0.50
     • Importers sell for dollars and they change them to € they get more euro for their dollars.
     • Falling value of euro good for exporters
   • Value of euro rises €1 = $1.50
     • Exporters are getting less euro for their dollars.

2. Importers spend money on foreign goods €1 = $1

   • Value of euro falls means you get less dollars for your euro €1 = $0.50
     • It costs more to buy the same amount of imports
     • If you are depending on imports for raw materials for production the cost of making the same amount of goods increase
     • Value of euro falls is bad for importers
   • Value of euro rises you get more dollars for your euro €1=$1.50
     • It costs less to buy the same amount of imports
     • Value of euro rising is good for importers

3. The price at which one currency is exchanged for another.

   • Currencies of our main trading partners not in Eurozone.
     • £ pound sterling
     • US dollar