How Currency Exchange Rates and US Dollar Fluctuations Affect the Cost of Tech Products
As the global economy evolves, currency exchange rates and US dollar fluctuations have pronounced effects on the tech market. So stakeholders in the tech industry must understand these fluctuations and their impact.
It’s easy to see why owners and traders monitor the rise and fall of currency exchange rates. First, they need proper analysis to make the right business decisions. And since the tech market is unpredictable, this knowledge will help them stay ahead of the curve and best their competition.
Likewise, end users must understand how these metrics factors influence the price of tech products. It’s their best chance at increasing purchasing power and getting more value for their money.
The Impact of Currency Exchange Rates on Tech Product Prices
While several factors influence the cost of tech products, currency exchange rates remain one of the most critical. The value of the US dollar, in particular, affects imports and exports, and the fluctuations cause unexpected price changes.
Hence, business owners and tech product enthusiasts must monitor currency fluctuations to be abreast of current rates. To monitor currency fluctuations, the DXY chart is a useful tool that provides up-to-date information on the relative value of the US dollar to other currencies. It is a graphical representation of the relative value of the US dollar to a host of other currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Therefore, dealers in tech products can predict price changes in the tech industry and act in their best interests.
A typical example of the effects of USD fluctuation on tech products is the rise or fall of a laptop when the USD increases in value compared to the country where the laptop is manufactured. Also, a strong dollar increases the purchasing power of holders, which means manufacturers can buy materials and components at a lower cost.
On the other hand, a stronger dollar may be devastating for tech stakeholders in other regions, especially when the local currency loses value against the USD. It’s worse for nations that import tech goods or products from countries that price products in USD. When these importers (individuals or companies) spend more, they, in turn, increase the prices for end users. But when the US dollar weakens, exporting becomes cheaper, and end users buy more tech products from other countries.
Examples of How Currency Exchange Rates Have Impacted the Prices of Popular Tech Products
In 2016, the UK chose to leave the European Union, causing a sharp depreciation in the value of the British pound. As a result, tech companies such as Dell and HP increased their prices in the UK to compensate for the weaker currency. For example, Dell raised the prices of its Inspiron and XPS laptops by around 10%, while HP raised the prices of its Spectre and Envy laptops by up to 15%.
In 2018, during the US-China trade war, the prices of products like smartphones and laptops were at an all-time high. This hike was because the tariffs and restrictions on certain Chinese products affected the value of the US dollar and the Chinese yuan.
That same year, Apple increased the price of iPhone models in India when the Indian rupee depreciated against the US dollar. The iPhone XR’s price had a 10% increase, while Apple raised the iPhone XS Max’s price by 5%. The smartphone company had to offset the effects of the rupee’s decline and maintain its profit margins.
As the tech industry continues to grow, companies must be able to navigate currency exchange rate fluctuations. Stakeholders must also understand how they impact product pricing to stay competitive and maintain profit margins.
Tech companies can decide to hedge against currency risks. They can use financial tools to reduce the impact of currency fluctuations on the company’s profits. Alternatively, tech companies can diversify their supply chain. Sourcing components and products from multiple countries can stem the effects of USD fluctuations on the market.
Currency exchange rates and US dollar fluctuations have far-reaching consequences that we cannot ignore. Therefore, stakeholders in the tech industry must learn to navigate the global market and remain competitive. They must also stay up-to-date with these fluctuations and understand their impact.