ALL ABOUT FOREX

The main role of the exchange rate is to allow international regulations related to international trade: an exporter wants to be paid in foreign currency, because they need currency to pay its employees or its suppliers, while the importer does not have a priori that its own currency to pay. Every time there is an international commercial transaction, there will be a foreign exchange transaction.
The exchange rate fluctuations will affect the prices of export goods. For example, if a product sold in France and the USA is 100 €, with an exchange rate of $ 1.25 per euro, therefore it will cost $ 125 (100 x 1.25) to U.S. consumers . A decline in the exchange rate at $ 1.10 per euro will drop the export price at 110 € (100 x 1.10), while a rise in the exchange rate will rise. Conversely, a well made in the USA, sold in France and worth $ 100, cost 80 € (100 / 1.25) to French consumers in the first case and 90.10 € (100 / 1.10) in the second case. Thus, any decline in the exchange rate of the national currency promotes exports and imports disadvantage, and vice versa for an increase in the exchange rate. So there is a possibility for a country to improve its balance of trade (and hence growth) if it gets a drop in the value of its currency. Countries that consistently under-estimate their currencies to facilitate their exports are accused of making monetary protectionism.