Exchange Rates And Sending Currency Abroad
The exchange rates of different countries currencies is the value of one currency when compared to the other. When the exchange rate of US Dollar currently converts to 45 Indian rupees, it means that 1 Dollar is worth 45 Indian rupees. That means for sending currency worth USD 1000 to a client in the US, an Indian person will have to send Rupees 45 thousand to him.
The foreign exchange market is a very large and dynamic market. Daily, currency worth billions of dollars is traded throughout the world. Rates keep fluctuating according to happenings in international trade as well as economics.
Exchange rates depend majorly on the supply and demand of currencies in the market. Demand for a particular currency means that many investors wish to invest their earnings in that currency. Maybe higher rates of interest in a country could prompt investors to go after that currency as investing in that currency would fetch them higher returns. Similarly, supply also has an effect on the exchange rate. In a scenario where there are many people who are looking to buy a currency but there is not enough currency available in the market for sale, then the rate of that currency would go higher. On the other hand, if the demand for a currency is low in the market while there is lot of that currency available for sale, the rate of the currency will begin to fall.
The inflation rates within a country also have an effect on exchange rates. A country where the inflation rate is high, the value of currency within that country will go down investors who are forex trading would not be keen to invest in it as the returns will be lesser due to high rate of inflation. The inflation level is monitored by the Reserve Bank but there are other factors governing it such as the cost of transportation of goods, petrol, etc.
Rates of exchange are affected by the economy of a nation. If the prices paid for exported goods are higher globally than the prices of imported goods, then the economy is in a strong position and foreign investors would be more than willing to invest in the country's currency as it would fetch them better returns. These are some of the things people look for when forex trading.
Article Source: FxTradingStock.com
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by: Lee Mel
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Word Count: 392
Date: Fri, 10 Sep 2010
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