Introducing Currency Rate

Currency Rates

Currency Rates

Executive Summary About Currency Rate By  Poonam P

Currency rates are fixed conclusively or authoritatively by the relative value of one of the given currency in terms of supply and demand for which particular given currency. Anyway there is always an element of chance regarding what determines a currency rate.

 It is believed that a strong currency is the one where the country which issues the currency generally holds an effective and efficient position in the international market. It is also seen in the international market that a particular currency rates will normally stay firm and have a tendency to appreciate against the given other currencies where there is felt a strong demand for the currency of a specific country.

In an economy, investment capital can be attracted towards that particular country then it is strong enough in maintaining relatively high interest rates as compared to other countries. This in turn creates a high level of great demand for that currency so that large investment is possible.

What Causes Volatility in Currency Rates?

Executive Summary About Currency Rate By  Dr. Timothy Ross

The value of a currency is not constant and all currencies change their value against each other during their lifetime. In a free foreign exchange market, the currency rates reflect the value of a currency pair and the extent to which a particular currency fluctuates against another is called volatility.

There are fixed-rate foreign exchange regimes, which do not allow fluctuations of the currency as opposed to the free-floating exchange rate. There are also pegged currencies whose value is tied to the value of another currency or a basket of currencies and their value varies in conjunction with the value of the currency they are tied to. A freely floating currency, however, always tends to fluctuate over time.

The free-floating currencies change their value on the Forex market daily, currency exchange deals are conducted in seconds, while a particular currency can gain or lose as much as 5-10% of its value in a single trading session.