What is the benefit of the foreign currency exchange market to the U.S. company?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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In general, firms benefit from the foreign exchange market because it allows them trade with other countries easily.  Firms can also benefit from the market if the changes in the strength of the US dollar changes in a way that is right for their kind of business.

Firms need the foreign exchange market in order to allow them to trade easily.  They need to be able to buy other countries' currencies so that they can buy goods from abroad.  They need firms in other countries to buy US dollars so that those firms can buy their products.

More specifically, importing firms can benefit from a strong dollar while exporting firms can benefit from a weak dollar.  A strong dollar allows firms to buy foreign goods more cheaply when they need to import.  A weak dollar allows firms in other countries to buy more easily from US companies.

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