Currency Exchange Rates Form an Axis of Foreign Exchange Market

Currency exchange rates are the rates at which two different currencies of two different nations are traded. Here, the currencies turn into commodities like any other commodity in the market and their foreign exchange rate is defined by currency rates. Currency rates are very crucial to any transaction in foreign exchange market. For example, if you are going for a vacation in U.S. and you are a Canadian citizen, you need to convert your Canadian dollar into U.S. dollar which require thorough knowledge of U.S. currency rates and also the  prevalent global affairs. According to the experts, before plunging in the deep and dark sea of foreign exchange market, one needs to study the market thoroughly at least for six months.

Currency exchange rates are often divided into two categories: fixed and floating. A fixed exchange rate involves mutual agreement between the two countries to maintain a stipulated fixed rate through the use of monetary policy. A floating rate flexible in a sense that two countries agree to abide by the international market forces determine the rate through demand and supply rule. In this, the rates would undoubtedly fluctuate with a country's exports and imports transaction.

The world has adopted to this floating rate because it has proved to be more  economically viable in spite of the fact that floating currency exchange rates are more fluctuating than the fixed ones. But, the biggest disadvantage of the fixed rates are they are decided by the government and therefore they tend to take into consideration political situation of the country rather than economic conditions of the country. For example, some countries peg their exchange rates artificially low with respect to a major trading partner to make their exports to that partner artificially cheap. Hence, currency exchange rates depend upon various factors and those factors contribute a great in determining foreign exchange rate.

Combination of Factors Including Currency Rates Decide Foreign Exchange Rate

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..

Sound Knowledge of Currency Rates Is Your Passport to Fluctuating Forex Market

Investor words defines currency as any form of money that is in public circulation. Currency can involve both hard and soft money. currency rates therefore are the rates with which a currency of one country can be exchanged with another currency of another country. Investor words say: “typically currency refers to money that is legally designated as such by the governing body, but in some cultures currency can refer to any object that has a perceived value and can be exchanged for other objects.” The designated currency rates are instrumental in deciding foreign exchange rate. Involving wide range and scope of buyers, foreign exchange market is a decentralized and over-the-counter market. While there are many factors that decide currency rates, one of the most important factors is the economic health of a country in question. Economic health then depends on various components such as debt load, deficit, spending policies. It is also dependent upon the purchasing power of the people of the country.

Another important thing to take into account is the fact that modern world is netted and weaved in the unprecedented revolution of information and technology. And, therefore, the balloon of independence has gone burst with a squelch of defeat. It is certainly not the independence but rather interdependence that matters the most. And, in a world of interdependence, any socio-political or socio-economical upheaval affects the entire world, especially the fluid foreign exchange market. While currency rates are generally decided by the Apex financial bodies or banks of the countries, they are undoubtedly driven by overall economic health of the country. And as we mentioned above, what this economic health involve. Inflation is a word that has been responsible to rock the parliaments of world’s big democracies and even dethroning the governments across the globe. It is this factor which is also responsible in deciding the currency rates. Read more..

All about Foreign Currency Exchange Rates Trading

Foreign currency exchange rate trading or Forex trading is the best source of making money online. Mostly people get attracted to currency trading as they can perform the transaction at anytime a day. Forex market work 24 hours except on weekends. Moreover it is the only global market which offers highest liquidity, does trillions of cash transactions each day worldwide. Forex trading is not limited to individuals, even the large scale banks, import-export house, government, organizations, multinational companies, etc. are involved in this highly revenue generating business.

For any individual who is beginner looking to investing in trading foreign exchange rate must understand that Forex market is completely unpredictable as the currency exchange rates can change anytime and even a fraction of change can lead to great profits or losses. There can be numerous factors which are responsible for change in a country's economy which reflects on its currency rate such as the banking system of the country, national income, debts, inflation, calamities etc. One need to be aware about the changing trends and the beginner must have the investment potential when jumping into Forex.

There are some stable currencies such as the US dollar, the Singapore dollar, the New Zealand dollar, the Swiss Franc; which are the right currencies to trade in when you don't want to take bigger risks or you are making large and long term investments. There are options available for day trading which consists of volatile currency, i.e. the pair of two currencies that shows a big fluctuation in their value in a day. You may avail online currency exchange rates guidance from Forex websites. There are many websites dedicated to offer free information on how Forex trading works, they provide real time foreign exchange rates of countries worldwide, moreover you can use currency exchange calculator to know the latest exchange value of your preferred currency. Read more...

Tourist's Guide to Currency Exchange Rate and Its Importance

For travelers especially those travelling outside one's own country currency exchange rate can be defined as the amount of foreign currency which can be bought using own currency. If you are in USA then the foreign currency rates will determine how many euros, bhat or pesos you can buy using one dollar. Going to a foreign place where things are going to be new to you is not all that easy. In case of any difficulty money will be your only friend to help you out. Give money and you are out of the chaos.

To make sure you have enough money for your foreign country travel ensure that you have gone through the foreign exchange rate between the two currencies and known how many dollars you will need to have an amount that will make your travel smooth. Many foreign travelers also prefer to maintain bank balance of an equal amount to make sure that the money can be used in case of emergency. Such a practice further expands your budget but is still very important.

You will get a clear idea of how much money you will need only if you will consider the currency exchange rate of both the countries. Analyzing your money requirement should be in fact your first step to prepare for the travel. For example if your budget for the tour is $10000 and you wish to go to Turkey then you will have nearly 15000 TRY after you convert the dollars to TRY. To know whether this much money will be enough to satisfactorily complete the journey it is important to find out how much money you will need by researching air fares, rent for hotel rooms, transport availability and cost and similar other things. Read More...