The relationship between exchange rate movements and economic trends
- 8월 29, 2017
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The relationship between exchange rate movements and economic trends
Just as economic trends affect the movement of exchange rates, the movement of exchange rates can also have a significant impact on economic trends.
If Japan announces policies such as lowering the benchmark interest rate to boost its economy or adding asset purchases, yen appreciation will increase in the market, so prices will rise and the value of the yen will often fall.
If the yen weakens, the price of commodities that depend on imports from Japan will rise, which can hurt Japanese economy by shrinking consumption.
On the other hand, the yen has a very positive effect on Japanese exporting companies.
Even if you export goods at the same price, you will get bigger profit if you change the payment amount to yen.
On the other hand, if the global economy shows shrinkage and demand for safe assets surges, the value of the yen, which is one of the representative safety assets, often climbs up.
If the yen appreciates, exporting companies that sell their products to foreign countries may be positive for importers who are able to import goods with less money, while sales are hit harder.
If the price of imported goods declines, the domestic price will stabilize, consumption will be boosted, and the burden will be reduced for companies paying their foreign debts.
If the exchange rate rises or falls, each has its own shortcomings and disadvantages. In any case, it will have a great impact on economic trends. Therefore, central banks in each country make use of various policies and strive to maintain appropriate exchange rates.
For this reason, it is important to look at the economic indicators to know the exchange rate before the FX transaction.
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