Foreign currency and exchange rate risks
Foreign currency issues when importing or exporting
Businesses which import or export goods need to bear in mind a number of key issues when making transactions in foreign currencies:
- Foreign currency transactions are sensitive to fluctuations in the exchange rate. A price you agree with a customer or supplier on one day could rise or fall if the exchange rate changes.
- If you're exporting, you must decide whether it's best to price your goods or services in the local currency of the country with which you're trading. The decision will depend on individual circumstances and on factors such as how you want to present yourself in that market and how your competitors set their prices.
- If you're importing components priced in a foreign currency that form part of goods you're selling in sterling, you'll need to decide how to price those goods to reflect the exchange rate.
- If you are trading with companies in the eurozone (ie the European Union member states that use the euro) there are many practices and standards to make life easier. See trading in the European Union.