The negative side effects of a stronger/increasing currency | TigerDroppings.com

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barry
Cincinnati Fan
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Member since Aug 2006
38820 posts

The negative side effects of a stronger/increasing currency



I'm doing some stuff for my acct class and i know that having the value of your currency increase can actually have neg effects on a company. Trying to get this straight in my head. Nikon and Canon both comment on the increasing value of the Yen for some of their lower numbers. Is it because as you export products its more expensive for people to purchase them?






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wiltznucs
South Florida Fan
Apollo Beach, FL
Member since Sep 2005
7959 posts

re: The negative side effects of a stronger/increasing currency


Yes, you are on the right track. Heres an oversimplification...

Imagine that you are the producer of a product(i.e. cameras for Nikon/Canon). If your local currency(the Yen) becomes more powerful(it takes more dollars to purchase each Yen) then the cost to the importer in their own currency has gone up.

The importer; lets say Best Buy in the US now sees an increase in their spending per unit they buy from you. Best Buy can then continue to buy from you or find a competitive product elsewhere. In many cases a countries currency getting stronger can actually be the death nell to its own exports. This is why many bash China for intentionally devaluing their currency. By doing so they are actually making their exports more competitive and desirable.

Another example closer to home is Canada. The timber and mineral market in Canada is huge. Canada prefers to have their currency weaker (relatively speaking) than the US Dollar because it makes importing from Canada a good proposition for American companies. During times when the Canadian dollar creeps closer to the American dollar the Canadian economy comes to a standstill.



This post was edited on 11/14 at 2:10 pm


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wickowick
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re: The negative side effects of a stronger/increasing currency


With China being a big exporter there is a reason why they manipulate their currency to keep it low...





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barry
Cincinnati Fan
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Member since Aug 2006
38820 posts

re: The negative side effects of a stronger/increasing currency


quote:

This is why many bash China for intentionally devaluing their currency. By doing so they are actually making their exports more competitive and desirable.


Don't they keep it at 1/10 of the dollar constantly or something like that?






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wiltznucs
South Florida Fan
Apollo Beach, FL
Member since Sep 2005
7959 posts

re: The negative side effects of a stronger/increasing currency


quote:

Don't they keep it at 1/10 of the dollar constantly or something like that?


China does devalue its currency through a number of methods to keep its export market strong. As a sovereign nation its a choice they get to make which also has implications on things like fuel, vehicles, etc that China imports.






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wickowick
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re: The negative side effects of a stronger/increasing currency


Little info on it here





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GoCrazyAuburn
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Member since Feb 2010
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re: The negative side effects of a stronger/increasing currency


What has already been said.


Well, looks like my work here is done...






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jimbeam
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University of LSU
Member since Oct 2011
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re: The negative side effects of a stronger/increasing currency


quote:

With China being a big exporter there is a reason why they manipulate their currency to keep it low...






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