How does currency fluctuation affect small business?

Currency fluctuations can significantly impact small businesses, particularly those involved in international trade. A strong domestic currency can make exports more expensive, potentially reducing sales abroad, while a weak currency can increase costs for imported goods and materials. Additionally, unpredictable exchange rates can complicate budgeting and pricing strategies, leading to potential profit margin erosion. Small businesses may need to implement hedging strategies or adjust pricing to mitigate these risks.