Exports refer to a country selling its goods and services to foreign markets. Exports have a number of effects on exchange rates:
Competitiveness: A country's exports are generally priced in its local currency, but exporters often compete on exchange rates. When a country's local currency depreciates, the price of its products becomes more competitive in other countries for exporters. In this case, a decrease in the exchange rate can help increase exports.
Costs: Exchange rate changes can affect exporters' costs. In particular, when a country's local currency appreciates, exporters can purchase raw materials and inputs they import from foreign countries more cheaply. However, the appreciation of the local currency can increase the price of products exported to foreign countries, which can reduce competitiveness.
Revenues: Exchange rate changes affect export revenues. When a country's local currency depreciates, export revenues increase because revenues received from foreign countries are more in local currency terms. Conversely, export revenues decrease when the local currency appreciates.
Market Access: Exchange rate changes can affect exporters' access to their target markets. When a country's local currency depreciates, products in foreign markets become more competitive, and exporters can sell more products to these markets. However, exchange rate changes can affect the stability of target markets, forcing exporters to cope with market risks.
For these reasons, exchange rates have a significant impact on exporters, and exporters often take measures to hedge against exchange rate fluctuations and manage their risks.