Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
What is Currency Valuation & Exchange Rates?
A weaker US dollar makes American exports cheaper abroad (helping exporters) and imports more expensive, and it raises the dollar value of foreign investments held by US investors. A stronger dollar does the reverse. The effective exchange rate is a trade-weighted average of the dollar against a basket of major trading partners' currencies.
Currency Valuation & Exchange Rates: a worked example
A US investor holding European stocks gains extra return if the euro strengthens against the dollar, even with no change in the stocks' local prices.
More terms in Economics & Financial Reporting
Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.
Statement of Cash Flows
Where cash came from and where it went: operating, investing, financing.