How Does The Exchange Of Non-Trader Exchange Effect?
Foreign currency exchange is needed. Not just for speculators, traders or financial investors. But it also takes the country and citizens of this world. Foreign currency exchange (often called forex / foreign exchange) has a major influence for a country. Such as travel abroad, payment of imported exports and economic reference.
An example is between the US dollar and the euro. Both instances of this currency are not so different in value so as to be easier to illustrate. The comparison is $ 1 will be equal to € 0.85.
From the value of the comparison, the euro is higher than the value of the dollar. If you have $ 1 and want to trade it with euro then you will only get € 0.85. For US citizens will be more reluctant to travel abroad especially to the eurozone region. That’s because everything from food to souvenirs in Europe will be about 38% more expensive than if both exchangeable currencies are in a balanced price. This is a description of the influence of Purchasing Power Parity (PPP). In contrast, citizens from Europe will be much more liberal to visit America on business or on holiday.
Then, this currency exchange will also affect the business of import export in both countries or regions. This businessman often makes transactions to get raw materials from several countries whose currency is different. US businessmen will generate much of their income in the US. But for US businessmen whose sources of raw materials come from Europe is expected to be exposed to higher costs for its production.
Especially for US-based multinational businessmen or companies based in Europe. The company must pay their employees with the euro currency. Based on this, margins will decline and will likely adversely affect the company’s overall profits. Vice versa.
The next impact is on foreign investment (PMA). There is the potential of European citizens (both individuals and companies) to expand their investment in the United States. They will also be more suited to acquisition of US-based and / or real estate businesses.
Well, this article just describes some impact of foreign exchange or foreign exchange or forex against a country. Forex also affects not only the financial sector but also the real sector. There are still many positive effects of forex though it can also result in negative impact.