Our detailed guide outlines why it is wise for business owners to track currency values in response to market changes and increasingly global trade.
When did you launch your business? Have you been trading for a while? Or is this something relatively new? Whether you’re one of the 85,000 businesses that launched online during lockdown and you’re planning on going global or you’ve recently expanded your operations overseas, it’s important that you know the ins and outs of international trade.
One of the key things to consider when trading internationally is the changing currency values. Understanding how this can impact on your business can help you to plan ahead. Here’s how to keep track of the changes and why this is a valuable process.
Why track currency values?
The slightest change to the currency in can have a knock-on impact on the value of your goods. How much you price your products at and how much you buy them for revolves around how much the currency you operate with is currently worth.
For instance, if you’re working in US dollars or British pounds, you’ll need to keep track of the impact of the pandemic to see how the USD or GBP is recovering. Likewise, this is the reason why he future of several UK businesses were plunged into doubt as Brexit talks got underway.
Rising price of imports
Having a grasp of forex trading and the shifting markets means that you are more likely to understand why imported goods are becoming more expensive. This gives you the opportunity to predict how forex rates are moving so you can factor this into how much you sell your goods for.
If, for instance, you buy stock from a country that has a currency with a higher value to the currency you operate in, then you could make a loss as you pay more for importing the goods than the price you sell them at.
Lower prices for your goods
If you’re selling to other countries and the price of the pound or US dollar falls, then you’re selling your goods at a loss as the country you’re selling to has a currency with a higher value. To avoid losing out, try to avoid any long-term trade deals and adjust the prices you sell at so you don’t make a huge loss.
Keep track of the wider economy
Keeping up with the economy in your country and how the economies of the countries you do business with is also important. Currency exchange rates are impacted by how well an economy performs. Investors more likely to choose to move capital to countries that have a healthy economic outlook. This, in turn, influences the currency rates.
So, by following the economic growth in your target countries, especially now as the world is impacted by he pandemic, you can make adjustments you your sales margins.