Currency exchange essay

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Currency exchange essay

Exchange rate of currency INTRODUCTION The exchange rate of currency in relation to other currencies represents the price of currency being expressed in terms of another currency or otherwise the expression in a national currency of a monetary unit price of the foreing country.

For any kind of purpose the exchange of currencies with each other requires previously the deployment of determined reports betwin them,which means the establishment of exchange rates or otherwise the exchange rate of currencies. But in fact further the comparison of price coins with each other ,the exchange rate is not simply a relative instrument as it is guessed,but a very important tool to connect the economy of a country with the rest of the world and at the same time a tool to transmit monetary,policy and economic changes etc.

There is a certain space of the use of foreign currency exchange rates as a political tool to influence macroeconomic variables ,it is therefore important the study of exchange rates in all aspects and the treatment of each factor that influencesthe latter.

Generally,the economic theory recognizes about 8 types of exchange courses,but courses which are between 2 extrems: This means that when we have changes to restore the balance again intervenes the country central bank by selling or buying currencies.

So,the fixed exchange course is ensured through continuous intervention of banks of different countries. The flexible systems courses between currency exchange rates take into account the changes in the level of prices,so inflation.

A high inflation rate is associated with currency devaluations because goods are more expensive by reducing the request for them. Between inflation and exchange rates there is a strong positive link. Particulary sensitive situations affecting uncertainty.

The expected inflation operates in current inflation directly as well as through exchange rates. The grouth of expected inflation exerts pressure for the currency weakening.

Currency exchange essay

As a result of the country expected inflation increase the exchange rate will grow. So it depends positively by an expected increase in the supply of money,depends negatively by an expected increase in our real income,and the forces expected exchange rate change in the futute.

If a country is more productive than the other,then the prices of goods to this country will be lower than the prices of foreign goods. As a result of domestic demand for goods increases and the currency is overdeemed.

The reduction of prices in the country increases exports leading to currency evaluation. Tastes and preferences for domestic goods compared with foreign ones. The increase of preferences for foreign goods leads to the depreciation of local currency. This is because a growing preference for foreign goods means import growth that leads to increased supply for domestic currency, so domestic currency depreciation.

The increased demand for local products causes appreciation of domestic currency, while increasing the demand for foreign goods leads to belitting of local currency. Theforeign trade restrictions through tariffs and quotas affect the exchange rates, because they affect on growth demand for domestic goods compared with those of foreign ones.

Their setting lows the offer for the local currency leading to currency evaluation.Foreign Currency Exchange Markets Summary Essay Sample Background to the Gold Standard The gold standard was the most popular monetary exchange between and towards the end of s.

The exchange rate of currency in relation to other currencies represents the price of currency being expressed in terms of another currency or otherwise the expression in a national currency of a monetary unit price of the foreing country.

Exchange Rate Fluctuation Factors The value of currency within a given country holds a different value to the currency of another country.

The values of currency are determined by an exchange rate. In quoting the exchange rate two methods can be used; the indirect and direct.

Foreign Currency Exchange Markets Summary | Essay Example

Foreign Currency Management Exchange Rate This is the rate at which the currency of one country would change hands with currency of another country. E.g. $1 = SLR Types of Exchange Rate 1. Floating Rate This rate depends on a levels of the international trade of a country and it does not interfere with the government of that country.

Currency in the Free Market Essay. production of currency by banks (credit) through monetary policy. An exchange rate is the price at which two currencies can be exchanged against each other.

This is used for trade between the two currency zones. Exchange rates can be classified as either floating or fixed. An exchange rate is, “The price of a unit of one country’s currency expressed in terms of the currency of some other country.”(Multinational Business Finance) An example of this is taking the United States dollar alongside the British pound.

Exchange rate of currency - Free Economics Essay - Essay UK