Having A Strong Currency – Good Or Bad For Your Business?

May 26, 2017 by

For any business to survive and grow the economy has to be developing. Only when the economy of the country grows, will it lead to the growth of all business in it. When the economy improves, the currency rate gets stronger and higher. This increase in currency rate increases the foreign exchange that flows into the country.

How Does All This Affect Your Business?

So the currency rate moves up or down, how does it affect your business? If you are not in international trade, does the exchange rate really affect you?

The answer is yes, it does. When the currency rate of a country is high, more foreign exchange comes in. When the foreign capital is high, the development of the country’s economy is also high. hence, when one spends on foreign goods, they get more for the same amount of money spent. This increases the purchasing power of the consumer and results in higher purchases.

Most businesses will require raw materials or other goods from other countries. When your currency is strong, you will be spending lesser to get these foreign goods, thus reducing your expenses. As a result, you will be spending lesser for the same number of final units as before.

Trading In FOREX

When you are in the business of trading in FOREX or are trading in FOREX as a part of raising funds for the company, a strong currency will only aid the earnings. If one is not in a position to pay attention to the FOREX investments but does not want to miss the booming market, they can turn to automated trading software like HBSwiss where everything is taken care of. This will ensure both the business and FOREX investments are taken care of when the currency gets stronger.

Impact On The Long Run

However, all this positive impact on the business due to a strong currency is only for a short while. When a particular currency is strong, it reduces the supply of that currency in the market. Hence there is lesser money to spend. After some time, the businesses will see a fall in demand due to reduced supply of money.

Also, people will find foreign goods cheaper due to the low exchange rate and be willing to spend more on foreign goods. As a result, the demand for local goods decreases and can slow down the domestic businesses and eventually lead to a loss.

When a currency gets strong, it initially benefits the economy but in the long run, it proves to be disadvantageous and eventually decreases the value of the currency.

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