Final answer:
Currencies such as U.S. dollars and Chinese yuan can significantly impact the operations of an athletic footwear business engaged in international trade. Exchange rate movements can affect the business's profits and decisions on exports. Additionally, banks face risks when borrowing in one currency and lending in another due to potential exchange rate fluctuations.
Step-by-step explanation:
Currencies play a significant role in affecting the operations of a company's athletic footwear business, especially when it engages in international trade. For instance, Chinese firms exporting products will earn revenue in foreign currencies like U.S. dollars but will need to convert those back to Chinese yuan to pay for domestic expenses such as wages for workers, payments to suppliers, and settlements with investors. In the foreign exchange markets, such a firm would act as a supplier of the U.S. dollars it earns and, concurrently, as a demander of Chinese yuan.
A strong U.S. dollar adversely affects U.S. exporters because it diminishes the value of foreign currencies when they are converted back to dollars, leading to reduced profits. This may force companies to either cut down on export volumes or increase their selling prices, which can also lead to a decrease in exports. Similarly, banks in countries with their own currency may experience significant risks due to exchange rate fluctuations when they borrow in major currencies like U.S. dollars or euros and then lend in the local currency, potentially leading to severe financial issues if the local currency depreciates.