Volatile-currency-dependent

This term describes an economic entity, market, or financial instrument whose value or stability is significantly impacted by fluctuations in currency exchange rates. It indicates a high degree of susceptibility to the unpredictable shifts in the relative values of different currencies. The term highlights the crucial role currency plays in the performance and viability of the subject, suggesting that changes in exchange rates can lead to substantial gains or losses. This dependence can affect profitability, competitiveness, and overall financial health, requiring careful management and hedging strategies.

Volatile-currency-dependent meaning with examples

• The small manufacturing business, heavily reliant on exporting goods to Europe, found itself volatile-currency-dependent. A sudden appreciation of the Euro made their products less competitive, slashing profit margins and forcing them to re-evaluate their pricing strategy and potentially seek new markets, and hedging opportunities.
• Emerging market stocks are often considered volatile-currency-dependent. Investors must consider not only the performance of the underlying company but also how fluctuations in the local currency might impact their returns. Unexpected currency devaluations can erode investment gains.
• The tourism industry in a country that relies on foreign visitors often demonstrates volatile-currency-dependent characteristics. An increase in their currency's value may deter visitors due to the higher cost, significantly impacting hotel revenues, food businesses, and impacting the hospitality sector overall.
• A company's earnings forecast can be severely affected when a major portion of its revenue comes from overseas sales, and the company is volatile-currency-dependent. Currency swings can create substantial gains or losses on translated income.
• Commodity prices, especially those traded internationally, are subject to volatile-currency-dependent market conditions. The relative value of the currency can change, impacting demand and, in turn, affecting commodity prices.