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Know How Exchange Rates Work and What Affects Them?


Planning to travel abroad anytime soon? Then, you would definitely need to brush up on forex currency exchange and currency exchange rates. You would need to know how to buy forex and also look up the best money exchange locations. Before that, it helps to understand what international money exchange is all about.
Essentially, foreign exchange rate is the amount or value of one currency vis-a-vis the other. What is the worth of one unit of your currency in another country’s unit of currency? So, if your country’s currency is the rupee, and you are travelling to the US, for example, what is the worth of a rupee in relation to the US dollar, and how many rupees would you need to shell out to convert it into one US dollar? That is what you would need to understand when you head out to buy forex. Foreign exchange is also the world market where currencies trade. The US dollar is still considered the dominant currency across the world, and many a time, currency exchange rates are mentioned in terms of the US dollar.
Factors that affect currency value
International money exchange rates are often dependent on a wide range of factors like change in governments, policy changes, financial decisions by governments across the world.
Inflation is also a key factor that affects exchange rates. A high rate of inflation means that there is a fall in exports and forex earnings drop. This automatically brings down the value of a country’s currency. It’s a cycle, and a drop in currency values again leads to inflationary tendencies.
A recession affects the value of currency, because interest rates dip and acquisition of overseas capital lowers.
Political instability is a key cause as well, and can create confusion and uncertainty, leading to drop in the value of currency.
Things to consider when you look for forex
Before you plan your travel, make sure what the currency in that specific country is,
To know more about How Exchange Rates Work and What Affects Them?, visit source blog.
Source: https://yourexpertguide.wordpress.com/2018/09/07/how-exchange-rates-work-and-what-affects-them/


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