Global Financial Management – Exchange Rates

The foreign exchange rate is the ratio of one currency to another; it is the value of a country’s money calculated using another country’s currency.
Currency fluctuation affects price paid and received for goods/services sold internationally.
When the AUD increases or appreciates
- It is worth more when converted to other currencies
- Imported goods become cheaper
When the AUD depreciates
- It is worth less when converted to other currencies
- Imported goods become more expensive.
- Exports are cheaper in foreign markets.