Currency depreciation can have both positive and negative effects on businesses. Here are some key impacts:
Export Competitiveness: When a currency depreciates, it makes a country's exports cheaper and more competitive in the global market. This can boost sales for export-oriented businesses. Import Costs: Conversely, a weaker currency makes imports more expensive. Businesses that rely on imported raw materials or goods may face higher costs, which can squeeze profit margins. Foreign Debt: Companies with loans denominated in foreign currencies will find their debt servicing costs increase as their home currency depreciates. This can impact their cash flow and financial stability. Inflation: Currency depreciation can lead to inflation as the cost of imported goods rises. Higher inflation can reduce consumer spending and affect demand for a company’s products.