The exchange rate is the value at which one currency can be exchanged with another, indicating how much of one currency is needed to purchase a unit of another currency.
For example, a Canadian manufacturer invoices a U.S. client for US$100,000 worth of goods. If the exchange rate is 1.35 (CAD per USD), the company receives CAD $135,000 — but if the loonie strengthens to 1.28, it would receive only CAD $128,000, reducing revenue by $7,000 without any change in price.
Why it matters: Fluctuations can instantly wipe out profit margins on international deals, making hedging strategies essential for global businesses.
.avif)
.svg){kind=small}