[SammyB3396]

Lets say Country X is purchasing products who's pricing is determined in Country Y's exchange rate.

1) If Country X's currency looses value against Currency Y, will that be immediately impact the purchasing power of consumers in Country X?

2) Will this be immediately reflected in Country X's CPI?

2) If not, what is a good indicator of when and by how much to adjust product prices for Country X to reduce the impact of changing exchange rates?

Any theory I can research would be great as well.

Thanks in advance.

[Curlyben]

What do YOU think ?
While we're happy to HELP we wont do all the work for you.
Show us what you have done and where you are having problems..

[SammyB3396]

Thanks Curlyben. I know that currency fluctuations impact purchasing power of Country X. That Exchange rates fluctuations are usually influenced by projected CPI and Monetary Policy (e.g. exchange rates) to control inflation rather than the other way around.Take the situation where Company A is selling to Country X but it's pricing is set in Currency Y. Therefore, what happens in Country X does not impact the cost of product for Company A from a fundamental pricing perspective. However, lets say Currency X lost value against Currency Y. Obviously customers in Customer X would have to pay more to afford Company A's products. Similarly, business' selling Company A's products will be asking for higher commission due to the higher price of product and reduced purchasing power of Country X's Currency.I have studied up on Options, Futures, etc to protect against Currency fluctuations, but from a pricing perspective, how do you build it in to pricing to protect against future currency fluctuations. Can you adjust the price to accommodate CPI projected inflation movements?I just need to know a theory.Thanks in advance.