The exchange rate refers to the value of the US dollar against
the values of currencies of other countries. Such a rate helps
determine how much we pay for imported goods and services and how
much we receive for what we export, among other things. When the
value of the US dollar drops, imports become more expensive, and
we tend to reduce the volume of our imports. Simultaneously,
other countries will pay LESS for some of our products and that
will tend to boost export sales. If imports and exports are a
substantial part of a country's economy, as is the case with
Canada, the exchange rate plays a particularly important role in
our economy. The exchange rate between two countries' currencies
is particularly important if the two countries are heavily
involved in trade.
What factors affect an exchange rate?
A country's exchange rate is typically affected by the supply
and demand for that country's currency in international exchange
markets. This is typically known as a floating exchange rate. If
demand, for say dollars, exceeds supply, then the value of the
dollar will go up. If however, the supply of dollars exceeds
demand, then its value will go down. A huge amount of money is
bought and sold on international exchange markets for many
different currencies.
Several factors influence the supply of, and demand for, a
given country's currency.
If INTEREST rates are HIGHER in, say, the US than in other
countries, then investors WILL choose to invest in the US,
increasing demand for the dollar, provided that the expected rate
of inflation is not higher in the US than among our trading
partners. If INTEREST rates are LOWER in the US than in other
countries, investors will choose NOT to invest in the US,
decreasing demand for the dollar.
If the US INFLATION rate is HIGHER, investors are LESS likely
to prefer the US -even with higher interest rates- because of the
expectation that the value of the dollar will be ERODED by
inflation. If our INFLATION rate is LOWER, investors are MORE
likely to prefer the US, because there will be NO expectation
that the value of the dollar will erode.
Trade balance also has an effect on a country's currency. If
world prices for what a country exports rise in comparison with
the cost of that country's imports, that country will be earning
more for its exports than it pays for its imports. The more
demand there will be for that country's currency, the better the
deal becomes. If investors are confident that the US economy will
be strong, they will be MORE likely to buy American assets,
pushing UP the dollar's value. If investors are not so confident
that the economy will be strong, they will be LESS likely to buy
the country's assets, pushing the dollar's value DOWN.
Sri Lanka Rupee, Stocks Drop After Currency Trading Band Removed Bloomberg The central bank narrowed the currency's trading band against the dollar on Feb. 3 and Feb. 6 and today, prior to announcing its removal. The monetary authority raised benchmark interest rates for the first time since 2007 on Feb.
India Eases Currency Trading Limits for Some Banks Wall Street Journal By SUDEEP JAIN MUMBAI -- India's central bank has asked banks to approach it individually for relaxing some foreign currency trading limits and has already eased restrictions for some banks, a top official said Monday. "Some limits, based on their ...
iFOREX Adds Oil to its list of Tradable Commodities MarketWatch (press release) ROAD TOWN, Tortola, Feb 09, 2012 (BUSINESS WIRE) -- Leading currency trading company, iFOREX, has recently expanded its services, giving all Forex trading accounts direct access to oil CFDs. Targeting an audience that has little or no experience with ...
This January Azerbaijan's exchange currency trading totaled $82.5 million Azerbaijan Business Center Baku, Fineko/abc.az. The Baku Interbank Stock Exchange (BBVB) has renewed statistics of its operations. BBVB reports that in January 2012 the nine participating banks concluded 28 deals in 36 trading sessions in e-trading system (BEST).
FOCUS: Technology Buoys Retail Currency Trading, Reshapes Old Models Wall Street Journal By Eva Szalay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Retail foreign-exchange trading is emerging as one of the biggest growth areas in the currencies space, and some of the trading firms that facilitate these flows are building up a whole new ...
Morgan Stanley Currency-Trading Head Stephen Mettler Leaves Bank BusinessWeek By Michael J. Moore Jan. 26 (Bloomberg) -- Stephen Mettler, who oversaw Morgan Stanley's interest rates and foreign-exchange trading businesses, has left the bank. Mettler, who joined the firm in 1997, retired, according to an internal memo obtained by ...
Bank of England and ECB Hold Steady, Indonesia Cuts CNBC.com [CNBC] ----------------------- MULTI CURRENCIES VS THE DOLLAR Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm. Learn more: The essential vocabulary for currency trading is on Key Currency ...
RELATED ARTICLESForex Trading Online - 7
Reasons Why You Should!
Forex trading online is a fast way to use your investment
capital to it's fullest. The Forex markets offer distinct
advantages to the small and large traders alike, making
Forex currency trading in many ways preferable to other
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Online Forex
Q1: When you consider that the foreign exchange market has
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Assessing the
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Could it be possible that you are staring right into the
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The Nature of the
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Consider the following: As a trader you are in a business.
Your strongest opponent has plenty of capital.
Trading Profitably on
the Foreign Exchange Market
You may be asking yourself "how does one begin to trade
profitably as a currency trader?". First, it is important to
closely monitor foreign equity markets to attempt to
predict or model how their respective currencies will
perform against other currencies, ideally, currencies that
are not very closely related, nor proportional, to the
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A Look at Forex Market
Makers
The investor in the currency market takes for granted that
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notice. Once an order is placed with a broker, the trade is
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Mechanical or
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Discretionary Trading. Pure discretionary trading will rely
solely on the traders judgment. For example a
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Trade Exit - How To Cut
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Cut your losses short and let your profits run. This is the
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Psychology Of
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The psychological aspect of trading is usually
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6 Critical Factors For
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Success in any profession can be broken down into a number
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Risk and Stock Trading
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International commerce has rapidly increased as the
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The Major Players in the
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Options Trading -
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In the case of Dow index futures options, when someone buys
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ISO 4217 in Forex
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ISO 4217 is an international standard describing three
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by the International Organization for Standardization
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and the third is usually the initial of the currency
itself.
MORE RESOURCES updated Thu. February / 09 / 2012
