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If the exchange rate for a country goes up then the trading country will have to pay more to purchase goods from that country. If the exchange rate goes down then the trading country will have to pay less to purchase goods from that country.

Conversely, if the exchange rate goes up for a country then it has strong purchasing power in that it can purchase goods from the trading country at a cheaper price. If the exchange rate goes down then it will have to pay more to purchase goods from their trading partners.

For example, currently, because the UK has a strong pound against the US dollar, it makes our exports expensive to purchase by the US; however, we are able to purchase their goods relatively cheaply (property, holidays etc); conversely, the pound has weakened against the Euro thereby making our European holidays more expensive; however it makes it cheaper for the Europeans to come to the UK.

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