How the currency conversion works? what factors effect the currency value?

Similar questions: currency conversion works factors effect.

Here is information on what affects exchange rates Fluctuations in exchange ratesA market based exchange rate will change whenever the values of either of the two component currencies change. A currency will tend to become more valuable whenever demand for it is greater than the available supply. It will become less valuable whenever demand is less than available supply (this does not mean people no longer want money, it just means they prefer holding their wealth in some other form, possibly another currency).

Increased demand for a currency is due to either an increased transaction demand for money, or an increased speculative demand for money. The transaction demand for money is highly correlated to the country's level of business activity, gross domestic product (GDP), and employment levels. The more people there are out of work, the less the public as a whole will spend on goods and services.

Central banks typically have little difficulty adjusting the available money supply to accommodate changes in the demand for money due to business transactions. The speculative demand for money is much harder for a central bank to accommodate but they try to do this by adjusting interest rates. An investor may choose to buy a currency if the return (that is the interest rate) is high enough.

The higher a country's interest rates, the greater the demand for that currency. It has been argued that currency speculation can undermine real economic growth, in particular since large currency speculators may deliberately create downward pressure on a currency in order to force that central bank to sell their currency to keep it stable (once this happens, the speculator can buy the currency back from the bank at a lower price, close out their position, and thereby take a profit). In choosing what type of asset to hold, people are also concerned that the asset will retain its value in the future.

Most people will not be interested in a currency if they think it will devalue. A currency will tend to lose value, relative to other currencies, if the country's level of inflation is relatively higher, if the country's level of output is expected to decline, or if a country is troubled by political uncertainty. For example, when Russian President Vladimir Putin dismissed his Government on February 24, 2004, the price of the ruble dropped.

When China announced plans for its first manned space mission, synthetic futures on Chinese yuan jumped (since China's currency is officially pegged, synthetic markets have emerged that can behave as if the yuan were floating). Like the stock exchange, money can be made or lost on the foreign exchange market by investors and speculators buying and selling at the right times. Currencies can be traded at spot and foreign exchange options markets.

The spot market represents current exchange rates, whereas options are derivatives of exchange rates. Sources: en.wikipedia.org/wiki/Currency_conversio... .

Supply and Demand Currency values are driven by supply and demand just like all other market based products/commodities. If the supply of a currency goes up, the currency value will fall and if the supply falls the currency will increase in value. On the demand side, if the demand rises the currency will increase in value and if demand falls the currency will decrease in value.So with that fundamental knowledge we need to look at what drives fluctuations in supply and demand of currency.

I'm not going to cover all the different drivers but a few off the top of my head are as follows: Domestic Interest Rates: If domestic interest rates rise (relative to foreign rates), foreign investors will be more likely to buy domestic bonds which now yield higher returns. This in turn increases the demand for domestic currency and drives an increase in the currency's value. Domestic Inflation: If domestic inflation increases (relative to foreign inflation) then foreign goods become relatively cheaper to domestic consumers.

As foreign goods become cheaper, domestic consumers purchase more foreign goods thus increasing the demand for foreign currency and the supply of domestic currency in the forex market. This drives domestic currency rates down..

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I am planning on sending some gifts to family back east. Need to know if it works?

What are the factors which fellow by any country in the printing of currency in the economy.

Five sentences about the role of education in successful financial planning using different verb tenses.

Planning to buy new kindle for my girlfriend ,she is going to dubai,just wondering if all 3g,wifi will works in duba.

What effect does transport strikes have on political factors.

Is there an advantage to doing your financial planning at a bank like harris or is it better to go with edward jones or.

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