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What is international finance all about?

advantages and disadvantages
August 24, 2010


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International finance may influence an institution's or individual's finances to a great extent. The change of exchange rates, interest rates, and inflation rates may affect the firm or the individual. Positive developments bring significant benefits, while harmful changes may cause losses.

For example, exporting companies benefit from a declining currency, as they receive more money for their products or services. In the same time, costs of importers will grow. Foreign-currency denominated debt increases in terms of home currency, when the domestic currency declines. Value of an asset denominated in a foreign currency is also influenced by exchange rate fluctuations. This means that foreign exchange adds an extra risk for manufacturers, investors, and borrowers, too.

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