Thursday 6 March 2008

How forex rate affect the business of a country

The dollar is weakening and it is weakening against all the currencies.
Yesterday, when the Bank of England left the interest rates unchanged at 5.25%, the GBP or Great British Pound hit a record high against the dollar, crossing the $2 mark per sterling pound.

At the time of writing this article, the each great British Pound GBP was quoted at 2.0094 dollar.

It’s a merry making time for the British tourists, travelers and shoppers who would wish to fly to USA for a holiday, vacation or shopping. The GBP is now very strong as compared to the dollar; hence people will get more dollars for each GBP, ultimately making it easy for Britons to enjoy the cheaply available US luxury in US dollars.

Unfortunately, nothing in this world comes for free. It will be the British manufactures who will loose their business. Even if people do not travel to USA for shopping, the cheaply available goods in cheap US dollar will be easier to import and hence the demand for the UK based manufacturer will reduce.

Related: Forex Trading Risk: Example of Laker Skytrain Airlines

So it may not be a long time for which this price anomaly can exist.
Ultimately, it will all settle down in the prices. Britons may will for short duration of time, but it will end up being nullified at some other places. Table of Contents

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