An exchange rate is what one currency costs in another. It determines the birr price of everything imported, the birr value of every export receipt and remittance, and the local-currency worth of any foreign investment.
Key takeaways
- A weaker birr makes imports dearer and exports more competitive.
- Official and parallel market rates can diverge, and the gap is itself a signal.
- Currency moves can wipe out or amplify an investment return before anything else happens.