Well, nobody is foreign to foreign exchange rate now! But, it is not necessarily a testimony to full knowledge of it either! After all, what does it mean by foreign exchange rate? To be short and simple, it is an exchange between two currencies of two different countries. Now, as the two different currencies are involved in the exchange, currency rates are decisive factors in determining the Forex rates. So, what are the factors that contribute in determining currency rates? Let us explore:
1) Co-relation of national currency to domestic primary commodity price
2) Socio-economic events of the nation
3) Inflation
4) Interest rates
5) Geo-political affairs and consequent decisions
6) Foreign policies
7) Natural disasters
When it comes to co-relation of national currency to domestic primary commodity price, it means that when the price of a primary commodity of a country increases, the currency experiences rise, and when the price goes down, the currency price too goes down. However, it is not always the case. The bond between the commodity price and currency price may not always be the decisive factor in deciding the currency rates of the country. So, how does foreign exchange rate get decided? Basically, it is dependent upon the currency rates, but those rates certainly affect foreign exchange rates and often become decisive factors in calculating the prices of currencies in Forex. Read more..
1) Co-relation of national currency to domestic primary commodity price
2) Socio-economic events of the nation
3) Inflation
4) Interest rates
5) Geo-political affairs and consequent decisions
6) Foreign policies
7) Natural disasters
When it comes to co-relation of national currency to domestic primary commodity price, it means that when the price of a primary commodity of a country increases, the currency experiences rise, and when the price goes down, the currency price too goes down. However, it is not always the case. The bond between the commodity price and currency price may not always be the decisive factor in deciding the currency rates of the country. So, how does foreign exchange rate get decided? Basically, it is dependent upon the currency rates, but those rates certainly affect foreign exchange rates and often become decisive factors in calculating the prices of currencies in Forex. Read more..
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