Blogging Sundays - Exchange rates

Exchange Rates

You may have seen an Exchange board like this.

What are exchange rates?

Exchange rates are rates at which another countries currency is worth in another currency, they change daily but some countries rates are fixed. eg. 1 USD = 3.67280

most countries rates are calculated by a foreign exchange market called forex. 

What influences Exchange rates?

1. Differentials in Inflation:

A country with lower inflation rates with have a higher value currency

2. Differentials in Interest Rates: 

countries with lower interest rates that are lower will have lower exchange rates

3. Current-Account Deficits

The current account is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services and interest.

4. Public Debt:

Countries with a higher public debt will have lower exchange rates

5. Political Stability and Economic Performance

A country with  corrupt government and lots of poverty will have lower exchange rates.