The values of the foreign exchange currency are fixed by the FX market or, the foreign market which has been spread across the globe and the relative values of the different currencies are determined by them. The currency value has another name of exchange rate whose work is to fix the value of one currency in terms of the other. We can cite an example in this context. The exchange rate of 2 USD means 2 United States Dollars to the British Pound or, BP is suggestive of 1BP is corresponding to 2USD. There can be two types of Exchange rates- one is fixed exchange rates and another is floating exchange rates. The floating system determines the rate of exchange going through various conditions of the market and it is such a rate that constantly keeps on changing. On the other hand, in case of the fixed or, specified method of exchange rate, the rate is fixed with the provision for the deflation of the currency. The recent days have seen a popularity of the floating rate method that almost all the currencies are following.
Some Information on the Floating Rate System
It is the demand and supply which are considered to be the primary determinant factors of the floating rate system. It is held as a good sign for the floating rate system if the demand faces a rise and the supply drops drastically; but if the opposite happens it becomes not so good for the floating rate. So, this way demand and supply influences the rate which in turn is controlled by the trade structure. An example can be given here. The supply and the demand of the dollars is determined by the US demand of imports and exports respectively. Suppose the demand of the exports goes down; what will happen is that this decreasing demand will have an impact upon the US dollars which again reduces the exchange rate. So, a balance between the demand and supply must be maintained in order to determine the ultimate exchange rate.
Currency trading and speculation are two another factors to specify the exchange rate. Similar to the stocks and shares people trade the currencies. If there remains a doubt that the demand for the dollars may fall down what the buyers do is that the sell all their US dollars which again is treated as a bad sign for the dollars.
The world economy has a profound effect on the foreign exchange currency. Based on the global market economy, we can find a very rapid change of the values of the foreign exchange currency. Here is given some healthiest pair of currencies according to the trend of the market- the US dollar and the Yen of Japan, the Euro and the US dollars, US dollars and the Pounds of Great Britain etc. For more than hundred years the FX market has controlled the situation. There are three ways by which you can explain the currency trends and they are the intermediary, long term and daily where the long term trends are determined by the condition of economy, the intermediary trends are happened due to the sudden change in the business and the daily trends are determined by the everday activities of buying and selling products.
Some Information on the Floating Rate System
It is the demand and supply which are considered to be the primary determinant factors of the floating rate system. It is held as a good sign for the floating rate system if the demand faces a rise and the supply drops drastically; but if the opposite happens it becomes not so good for the floating rate. So, this way demand and supply influences the rate which in turn is controlled by the trade structure. An example can be given here. The supply and the demand of the dollars is determined by the US demand of imports and exports respectively. Suppose the demand of the exports goes down; what will happen is that this decreasing demand will have an impact upon the US dollars which again reduces the exchange rate. So, a balance between the demand and supply must be maintained in order to determine the ultimate exchange rate.
Currency trading and speculation are two another factors to specify the exchange rate. Similar to the stocks and shares people trade the currencies. If there remains a doubt that the demand for the dollars may fall down what the buyers do is that the sell all their US dollars which again is treated as a bad sign for the dollars.
The world economy has a profound effect on the foreign exchange currency. Based on the global market economy, we can find a very rapid change of the values of the foreign exchange currency. Here is given some healthiest pair of currencies according to the trend of the market- the US dollar and the Yen of Japan, the Euro and the US dollars, US dollars and the Pounds of Great Britain etc. For more than hundred years the FX market has controlled the situation. There are three ways by which you can explain the currency trends and they are the intermediary, long term and daily where the long term trends are determined by the condition of economy, the intermediary trends are happened due to the sudden change in the business and the daily trends are determined by the everday activities of buying and selling products.
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