In more ways than one, currencies are the building blocks of every economy, and businesses are the link to goods and services controlling the wealth of a country. These systems work hand in hand and cannot exist without the other. At the international level, foreign currencies play a fundamental role in enabling businesses to exist globally, and their relevance continues to take a positive growth projection. Today’s article will detail this relevance, particularly for retail businesses.
Why is foreign currency important in retail businesses?
For entrepreneurs and small business owners, there are several reasons why foreign currencies could boost their business. For many, the ability to access a global network and transact with people outside of their respective countries comes first. On other levels, businesses are beginning to embrace the idea of foreign investment opportunities to diversify their assets and grow funds.
Investment opportunities most businesses adopt include forex to stocks, bonds, money market accounts, real estate, and more. The forex market is the biggest of these options and is a global marketplace for small and large-scale businesses to scale through numerous profitable ventures. One major platform facilitating these foreign exchange processes is TradingView, which is growing in popularity amongst investors and business owners.
Let’s address how investment, global trades, and currency exchange rates are three significant factors relevant to using foreign currencies in retail businesses.
Global trades
The endgame of every business owner is to grow bigger and attain higher levels of profitability. Global trade is a rare opportunity for retail businesses to access a bigger consumer market, ultimately generating more funds and revenue. For international trade to work, there is a need for foreign currencies to aid transactions. The importance of these currencies in this context lies in their ability to facilitate cross-border transactions for retailers.
Investment
Most businesses’ long-term success relies on investment, especially when expansion talks are on the table. The good part about today’s investments is that they are not bound by geographical and demographical barriers, and here is where foreign currencies come into play.
Investing in foreign currency is one common way businesses can make conscious steps toward growing their assets. It often involves buying the currency of a particular country and holding it with hopes that this currency will increase in value against other currencies. This is the most basic practicality of foreign currency investment, and we see a lot of businesses taking advantage of it, especially when there is a pattern of the said currency taking a positive growth projection. You can trade foreign currency through banks, financial institutions or trustworthy brokers.
More so, investing in multiple assets is another way to go. In this context, businesses can invest in advantageous assets like stocks, real estate, bonds, ETFs, Global mutual funds, etc. Unlike foreign currencies managed by financial institutions or banks, these assets are mostly traded through centralised exchanges. Investing in multiple assets allows businesses to edge against more significant losses. With a diversified portfolio, there is a chance of different risk levels and possible investment outcomes.
Stocks and bonds can be less risky than less liquid investments like real estate. These investment opportunities have their respective tax ratios. Do your homework before choosing to explore any investment opportunities.
Currency exchange rates
Change in currency rates is another factor of huge relevance to retail businesses, as it influences the cost of selling and buying products. For small business owners, this effect could come in 2 ways. That is, changing the cost of supplies purchased from neighbouring and distant countries and changing the interest of customers overseas in certain products.
A typical example would be a Nigerian business owner who buys products from a UK supplier. With the Nigerian Naira currently losing more of its value and trading at a rate of #1250 to £1 (Nigerian currency is #), there is bound to be an equivalent increase in the cost of the product they purchase. Likewise, there will be a change in the amount they sell those products. The supplier would need to increase the sale price to maintain the existing level of profitability. On the contrary, if the value of the Naira rises again, there will also be an equal reduction in the amount of goods purchased and the sales price of such items.
Foreign currencies are the basis of foreign trade, and price fluctuations are bound to have an equal effect on businesses.
Bottom line
We’ve established that currencies are the building block of the economy, and retail businesses operating internationally all have needs for foreign currencies. All businesses are bound to be affected by changes in foreign currency rates, directly or indirectly. But at the same time, there are also opportunities for them to explore these changes. Whether in terms of investments or exploring global trades, what’s most important is for businesses to try out as many options as possible and understand their choices before making any financial decisions.
