The Foreign Exchange market can be explained simply by stating that it’s a buy and sell market. Your product is the world’s currencies. A currency is the money of a country. In the United States, the form of currency is the dollar. In Japan, their currency is the Yen. Each country has adopted their own currency, and even if some countries use the word dollar, it doesn’t mean that they are equal or the same as a dollar from another country.

$1.00 US dollar = $1.2018003 Canadian dollars

The exchange rate of a currency will depend on many factors, including the inflation and economic status of that particular country.

The rating of a country will also play a huge role in determining the value of its currency. A highly developed industrialized country will most likely have a stable economy, hence a good currency. The rate of the currency will not be fluctuating too much. The Foreign Exchange market works because countries do their best never to upset their economy, for obvious reasons. Unlike the stock market which deals with publicly listed company stocks, the Foreign Exchange market is not as vulnerable.

Understanding How Currency Exchange Works

Executive Summary about currency convert By Rick Williamson

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. 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.

Check out other guide on Exchange Currency

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