1. Uncertainty and diminished trade may result if traders cannot count on future prices of exchange rates, which affect the value of their planned transactions. (However, see Last Word for this chapter for ways in which traders can avoid risk.)
2. Terms of trade may be worsened by a decline in the value of a nation's currency.
3. Unstable exchange rates can destabilize a nation's economy. This is especially true for nations whose exports and imports are a substantial part of their GDPs.