Global Financial Management – Exchange Rates

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  • 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.

Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.