How do exchange rates affect international trade?

Exchange rates significantly impact international trade by influencing the relative prices of goods and services between countries. When a country's currency strengthens, its exports become more expensive for foreign buyers, potentially reducing demand; conversely, imports become cheaper, increasing the volume of goods imported. Conversely, a weaker currency can boost exports by making them more affordable for foreign markets, while raising the cost of imports. Thus, fluctuations in exchange rates can alter trade balances and affect economic relationships between nations.