We uncover how exchange rate affects international business, examining its sweeping effects on export pricing, import costs, supply-chain resilience, foreign direct investment (FDI), corporate hedging, and monetary-policy responses. Moreover, we spotlight the growing role of fintech in international money transfer, from migrant workers who send money home to platforms enabling money transfer to Africa. Consequently, firms and individuals can harness digital tools and strategic hedging to navigate volatile currency markets and protect their bottom lines.

Exchange Rate Fundamentals

An exchange rate is the price of one currency expressed in another, determined by supply and demand in the global forex market. Furthermore, interest-rate differentials, inflation expectations, and trade balances drive currency movements​. Consequently, volatility in exchange rates acts as a non-tariff barrier, altering the relative cost of cross-border trade and investment​.

Export Competitiveness

Pricing Power and Market Share

When a home currency depreciates, exporters can lower foreign currency prices while maintaining domestic currency revenues, thereby gaining market share abroad​. Conversely, currency appreciation forces exporters to either raise prices, risking lost sales, or absorb margin declines.

UK Automotive Sector Case Study

For example, the sizable depreciation of sterling following Brexit made UK-manufactured cars cheaper for eurozone buyers, boosting export orders by double digits. However, the same depreciation increased the cost of imported components by around 8%, squeezing producer margins and underscoring the two-sided nature of FX moves.

Import Costs and Supply-Chain Resilience

Appreciating domestic currency lowers the cost of imported raw materials and capital goods, temporarily relieving margin pressures for manufacturers with global supply chains​. Conversely, depreciation raises input costs, forcing firms to either accept slimmer margins or pass on higher prices to customers.

To mitigate these risks, businesses diversify suppliers across multiple currency zones, invoice in stable reserve currencies (USD, EUR), and employ natural hedging by matching currency inflows with outflows in the same currency.

Foreign Direct Investment and Capital Flows

According to UNCTAD, stable exchange rates reduce repatriation risks and lower the return thresholds required for foreign investors. Yet volatility can deter investment: global FDI flows fell by around 8% in 2024 when excluding conduit economies, as companies delayed cross-border commitments amid FX uncertainty.

In emerging markets, particularly in Africa, currency depreciation can make local assets cheaper for foreign investors, stimulating greenfield projects amid volatility. Nevertheless, excessive FX swings raise the cost of capital and complicate long-term planning.

Corporate Hedging and Risk Management

Traditional FX Instruments

Large multinationals hedge currency exposures with forward contracts, options, and swaps arranged through banks, locking in rates to stabilize margins against spot-rate swings​. Under accounting standards like IAS 21, firms must recognize FX gains and losses on foreign currency transactions and translation differences in financial statements​.

Fintech Innovations in Hedging

Increasingly, fintech for remittances platforms extend FX-risk tools to SMEs and individuals. For instance, Wise’s multi-currency business accounts allow holding and converting 40+ currencies at near mid-market rates, with optional forward contracts up to 12 months ahead. Similarly, Revolut Business offers bespoke FX forwards, enabling small firms to pay overseas suppliers with predictable costs. These fintech tools simplify FX risk management, making them particularly useful for SMEs handling cross-border payments.

Policy Responses and Central-Bank Interventions

Central banks often intervene in FX markets or adjust interest rates to stabilize extreme currency moves. For example, Bank Indonesia held its benchmark rate at 5.75% on April 23, 2025, aiming to shore up the rupiah after a 4% YTD depreciation amid trade-war spillovers​. Moreover, BI has purchased sovereign bonds and sold foreign currency in “sizeable amounts” to defend the rupiah in both onshore and offshore markets.

Similarly, the Swiss National Bank has discussed currency interventions to curb a near-9% franc surge, its largest in decades, that threatens export competitiveness and inflation targets. Such interventions underscore monetary authorities’ pivotal role in managing the macroeconomic fallout of volatile FX markets.

The Role of Remittance and Fintech Platforms

International Money Transfer Technologies

The same digital rails that underpin corporate hedging tools also power consumer international money transfer services. Platforms like Wise, PayPal, and TransferWise offer transparent fees, real-time tracking, and robust KYC/AML safeguards for those who send money home​. Meanwhile, specialized apps such as NALA are expanding corridors to Pakistan and beyond, ensuring secure money transfer under FCA regulation​ , remittance Prices Worldwide.

Money Transfer to Africa

Remittance flows to Sub-Saharan Africa reached US$54 billion in 2023, covering essential needs and bolstering local economies​. However, Africa remains the most expensive region to remit to, averaging 8.45% cost on a US$200 transfer in Q3 2024, highlighting the need for more efficient corridors​ . Remittance Prices Worldwide. Tech-driven MTOs and mobile money networks are gradually reducing fees and accelerating payouts, bridging financial gaps for millions.

Implications for Businesses and Individuals

Consequently, both firms and individuals must adopt proactive FX strategies:

• Price dynamically: Incorporate currency-adjustment clauses in contracts.

• Hedge selectively: Use forwards or options for predictable exposures.

• Diversify channels: Leverage fintech for cost-effective international money transfer.

• Monitor policy: Track central-bank signals for intervention or rate shifts.

Such measures help maintain margins, secure competitive pricing, and ensure reliable money transfer to Africa or any global corridor.

Conclusion

In Summary, how the exchange rate affects international business extends far beyond simple currency conversion. It shapes export competitiveness, import costs, investment flows, corporate risk management, and even central-bank policy. Moreover, modern fintech for remittances empowers both multinationals and migrant workers to send money home with unprecedented transparency and speed.

About Us
Roze Remit is a trusted FCA-authorized money transfer company offering fast, secure, and zero-fee international remittances. Operating from the UK, Canada, Ireland, and Switzerland, we ensure your money reaches loved ones in seconds. With the best rates and zero fees, sending money home is simple and affordable.