Currency Exchange Guide

Currency Exchange

If you have to exchange one country's currency with that of other countrys currency, foreign currency exchange rates come into play. The banks will convert your currency to the currency you desire at the prevalent exchange rate. This means that the currency whose supply has increased has been devalued. The currencies are traded on the foreign currency exchange market and it is not necessary that the currencies will be available in the same amount always. There are various factors that affect the supply of the currencies in the currency exchange market.

Factors like exports companies, foreign investors, speculators and central banks affect the currency exchange market.

The US export company will now sell the Euros in the currency exchange market. Foreign investors: This process also involves currency exchange. This action will increase the supply of his currency (thereby depreciating the value) in the currency exchange market and will decrease the supply of the currency (thereby appreciating the value of the currency) of the country where he is investing.

Speculators and central bankers: there are many speculators in the currency exchange markets. The central bank like Federal Reserve keeps various currencies in the reserve so as to influence the foreign currency exchange market when required.

You may have noticed that currency rates are subject to change from time to time. First of all, it can happen that different places, which offer currency exchange services, establish different currency exchange rates.