Exchange rate fluctuation is a factor that influences international trade, as it affects importers to buy goods and exporters to sell abroad.
How does the exchange rate impact exports?
Currency exchange has a significant impact on a country's exports. The importer must pay for the purchase of goods with the exporter's currency; to do so, he must obtain this currency by exchanging it with his country's currency
When the currency of the exporting country is devalued against the importing country's currency, the latter's purchasing power increases. The exchange rate allows it to buy more foreign currency to pay the supplier in its market.
In other words, when the exporting country's currency is revalued against the importing country's currency, the importing country's purchasing power is lowered. To acquire enough foreign currency to pay for the transaction, you will have to pay more money in the currency of your market.
What implications does this have for the market?
To buy and import products from another country, you have to pay for them in that country's currency. For instance, if a U.S. company wants to buy something in any European Union country, it will have to pay for it in euros.
Now that the euro has devalued and is at parity with the dollar, other companies will find it cheaper to buy in the European Union if they switch from the dollar. Otherwise, EU countries that have to buy oil and fuels that are paid for in dollars will be much more expensive as they use the euro as their currency.
Therefore, this depreciation may also affect imports and exports in the eurozone, even if they have the same currency.