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Sun 08 04 Are you an expat who sends money home regularly or a frequent traveller who trots across the globe for business or leisure? Currency exchange rate is defined as the rate at which one currency can be converted into another. Understanding the reason behind the exchange rate volatility can help you identify the best time to send money or even travel abroad. Here are top 3 factors that cause currency rate fluctuations.
Inflation rate is the rate at which the general price of goods and services increase in the country. Lower inflation rates indicate a healthy economy thus resulting in significant appreciation in its currency value. The amount of currency in circulation is called the monetary supply of the country. Central banks all over the world take several measures to maintain stable money flow by benchmarking interest rates.
Interest rates indicate the cost at which money can be borrowed. When the interest rate is lowered, businesses tend to borrow and invest thus increasing monetary rotation and stimulating the economy. However when there is too much money in circulation and the supply of goods are less, high inflation creeps in stifling the economy, thus causing exchange rate depreciation. Countries with uncertain political, social and economic conditions do not attract investments. When confidence is lost in a particular market, investors quickly withdraw their money and move their capital to more stable countries.
Demand and supply mismatch triggers higher inflation rates, thus affecting the currency exchange rates. Even poor social conditions such as low employment rate causes weak spending, thus curbing money flow. Economic factors such as budget deficits or surpluses, positive trade balances when exports are more than the imports and inflation levels influence the foreign exchange rates.
Hence while planning a huge remittance or a vacation, make sure you look for Forex service providers who offer you best exchange rates. Several foreign exchange houses such as UAE Exchange provide profitable deals in foreign exchange rates along with instantaneous Forex rate updates. E-mail required, but will not display.
Notify me of follow-up comments. Feedback Request a call back. KCA Talent Scan Next Phase in International Money Transfer. Rate this item 1 2 3 4 5 2 votes. Inflation Rate Inflation rate is the rate at which the general price of goods and services increase in the country. Monetary Supply The amount of currency in circulation is called the monetary supply of the country.
Political, Social and Economic Conditions Countries with uncertain political, social and economic conditions do not attract investments. Now go ahead, send money to your loved ones and plan great vacations at the right time! Last modified on Friday, 21 October Related items How do you forecast exchange rates?
Reasons why you should watch the dollar movement before you remit! A Crash Course Say goodbye to currency exchange worries. Say hello to gocash prepaid card. More in this category: Add comment Name required E-mail required, but will not display Notify me of follow-up comments Refresh Send.