The role of the government
Exchange rates are important to everyone, particularly to people whose business depends on buying and selling goods in different countries.
It is relatively inexpensive to buy things from other countries with a strong currency. Businesses importing goods have to pay less to purchase the goods they need. However, it also means that those exporting goods find that their product is relatively expensive to customers in other countries. It will be harder to find clients in other countries.
Governments understand that the exchange rate for their currency will influence their country’s economy. It will affect how much goods cost and whether businesses succeed or fail. If the exchange rate is unfavourable for too long, many people may lose their livelihoods and become unemployed. A poor exchange rate can create further economic and social problems.
A seemingly minor change in the exchange rate can lead to a substantial difference in profit or loss when trading vast sums of money. Exchange rates are vital for everyone and are monitored closely by governments and businesses. Some financial traders are employed only to analyse exchange markets and decide when to buy or sell a particular currency.