Constant Currencies

AAA

DEFINITION of 'Constant Currencies'

An exchange rate that eliminates the effects of exchange rate fluctuations and that is used when calculating financial performance numbers. Companies with major foreign operations often use constant currencies when calculating their yearly performance measures.

INVESTOPEDIA EXPLAINS 'Constant Currencies'

For example, consider a French company that sells primarily abroad and sets its prices according to U.S. dollars. If sales increase 10% in dollar terms, but the dollar fell 5% against the franc during the year, only a 5% increase in sales will be reported in the accounts, unless a constant currency is applied in the calculation. In other words, the use of constant currencies allows companies to show performance unaffected by currency fluctuations.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Currency

    A generally accepted form of money, including coins and paper ...
  3. Forex - FX

    The market in which currencies are traded. The forex market is ...
  4. Transaction Risk

    The exchange rate risk associated with the time delay between ...
  5. Translation Exposure

    The risk that a company's equities, assets, liabilities or income ...
  6. Translation Risk

    The exchange rate risk associated with companies that deal in ...
Related Articles
  1. Forex Education

    Currency Exchange: Floating Rate Vs. ...

  2. Forex Education

    Dollarization Explained

  3. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

  4. Forex

    How are foreign exchange rates affected ...

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center