Factors that Influence Exchange Rates
Foreign exchange rate is among the most important indicators of a country’s relative economic health level. The forex rate of the country offers a window to the stability of its economy. Thus, it is always under close watch and scrutiny. For example, if you need to receive or send money denominated in foreign currency, you need to get updated on the prevailing exchange rates.
Exchange rate can be defined simply as the value at which the currency of one country can be converted into the currency of another country. The rate may fluctuate on a daily basis due to the influence of market forces that include the supply and demand of one country’s currency to another.
So, exactly what affects exchange rates? This section will cover some of the main factors that cause the fluctuations and variations in exchange rates. We will explain the reasons for the currency rates’ volatility to help you better appreciate the best times to engage in foreign currency exchange.