Forex Trading Blog | Economic Exposure

Forex Trading Blog | Economic Exposure

This Forex Trading Blog article is going to discuss the meaning of Economic Exposure, and how it relates to forex trading. Although there are no concrete forex trading tips in the article, Economic Exposure is a huge risk for many companies.

In the past 100 years, we have seen global trade skyrocket. With Many foreign companies manufacturing products, this can open the door to Economic Exposure for companies that are in this market. Our forex trading blog also references other non financial indicators in previous articles . Economic Exposure is when a company’s assets, investments, cash flow, are affected by fluctuated currency rates.

One example would be an import/export company. Let’s say that I own a company that imports Chinese made parts for computers. Our job here is to then sell all of the parts that we paid for and sell them to US companies. Well yes, this all sounds nice and dandy but in fact, Economic Exposure is a big risk here. Let’s say that the Chinese government suffers a huge deflation of their currency. Because of this deflation YOU will be directly affected. The cost of goods will not stay the same, your margins will be thrown off and your company goes down the tubes. For this reason, many international countries have currency holdings to help hedge against Economic Exposure.

Our Forex Trading Blog isn’t always trading tips. Sometimes it is best to understand the big picture, before you dive into trading.

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