How Currency Exchange Rates Work And What Influences Them
Most of us would not claim to have an in depth knowledge of the stock markets and how currency exchange rates work, but most of us are aware of the existence of currency exchange rates and that their value changes regularly. Many of us don't take too much notice of exchange rates unless we are planning a vacation overseas, but they do affect our lives on a daily basis.
Currency exchange rates reflect the relative value of a currency against another world currency. Exchange rates are expressed as a ratio compared to another currency. For example - 1 US Dollar = 105 Yen. These rates fluctuate a little each day, and sometimes they can rise or fall dramatically depending on what it is happening in international traded and economics.
The value of a currency in exchange for another is determined by the supply and demand for that currency. There are various factors that can affect the supply and demand. For example, if the US Reserve Bank raised interest rates substantially, then many traders would want to invest money in US Banks and this would strengthen the value of the US dollar against other currencies. In contrast, if the US Federal Mint decided to print lots of extra money and release it to the marketplace, then this proliferation of money would devalue the US dollar against other currencies.
The inflation levels in a country can also affect currency exchange rates. If an inflation level is high, then the currency will be devalued as foreign investors will be less likely to invest in a currency that has a high level of inflation and will not give them a good return over time. The reserve bank monitors the level of inflation, but there are several external factors that influence the inflation level such as the cost of transporting goods and petrol.
It is essential that the nation's treasury gets the trade balance right if a currency is to remain strong. When the prices paid globally for exported products are higher than what the same country is importing, then the economy will be in a good position and the currency will remain strong. Foreign investors will purchase more with that country's currency and the economy will tick along. If the reverse is true, then this devalues the currency against others.
People are affected by currency exchange rates regularly, as they determine the price that people pay for imported goods in a country. They also determine how popular your country's exported goods are to other countries.
Jobs and economic stability are also affected by currency exchange rates. In order to be more competitive companies and businesses may be forced to cut costs to remain viable against other producers around the world. This can translate into people being let go from their jobs. Most recently this has been seen around first world countries as part of the global economic crisis.
Currency exchange rates are affected by a number of economic forces that dictate the value of the currency. Reserve banks try to modify inflation and interest rates in order to keep the currency at the ideal balance for a country's trading requirements. - 23218
Currency exchange rates reflect the relative value of a currency against another world currency. Exchange rates are expressed as a ratio compared to another currency. For example - 1 US Dollar = 105 Yen. These rates fluctuate a little each day, and sometimes they can rise or fall dramatically depending on what it is happening in international traded and economics.
The value of a currency in exchange for another is determined by the supply and demand for that currency. There are various factors that can affect the supply and demand. For example, if the US Reserve Bank raised interest rates substantially, then many traders would want to invest money in US Banks and this would strengthen the value of the US dollar against other currencies. In contrast, if the US Federal Mint decided to print lots of extra money and release it to the marketplace, then this proliferation of money would devalue the US dollar against other currencies.
The inflation levels in a country can also affect currency exchange rates. If an inflation level is high, then the currency will be devalued as foreign investors will be less likely to invest in a currency that has a high level of inflation and will not give them a good return over time. The reserve bank monitors the level of inflation, but there are several external factors that influence the inflation level such as the cost of transporting goods and petrol.
It is essential that the nation's treasury gets the trade balance right if a currency is to remain strong. When the prices paid globally for exported products are higher than what the same country is importing, then the economy will be in a good position and the currency will remain strong. Foreign investors will purchase more with that country's currency and the economy will tick along. If the reverse is true, then this devalues the currency against others.
People are affected by currency exchange rates regularly, as they determine the price that people pay for imported goods in a country. They also determine how popular your country's exported goods are to other countries.
Jobs and economic stability are also affected by currency exchange rates. In order to be more competitive companies and businesses may be forced to cut costs to remain viable against other producers around the world. This can translate into people being let go from their jobs. Most recently this has been seen around first world countries as part of the global economic crisis.
Currency exchange rates are affected by a number of economic forces that dictate the value of the currency. Reserve banks try to modify inflation and interest rates in order to keep the currency at the ideal balance for a country's trading requirements. - 23218
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Inflation and interest rates affect currency exchange rates. Learn all about an exchange rate calculator and the many variables that help current value of different monies.
posted by X - Men @ 9:34 AM
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