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2. Foreign currency exchange - A highly volatile market
The foreign currency exchange market is a highly volatile sector that is
subject to varied external and internal factors. Due to those influencing
aspects, the currency exchange rate has become vulnerable to frequent
changes. There are reports that indicate that the currency conversion rates
even can change within minutes.
3. Which Factors affect the market?
There are two main factors -
Political - The stability/instability of a country’s government and political
scenes influence its currency. Political tensions eventually bring a huge change
in the economic market.
Economic - Economic situations of a country matter significantly on the value
of a country’s currency.
4. Different economic factors affecting currency rates
Interest rates - A country’s ability to provide loans is proved through the
amount it charges as its interest rate. If the interest rate is high then the
currency value is in a good position.
Terms of trade - If the percentage of a country’s export trade is higher than
that of import, the currency value would be high. If the opposite then the
currency value is subject to fluctuations.
Continuing……..
5. Inflation rate - If a country has a high inflation rate, then the currency value
tends to depreciate fast.
Public debt - If a country is high on public debt, then foreign investors show
less interest in that country. In that case, its currency value is supposed to be
below the expected level.
Continuing……..
6. What to keep in mind before investing in currency exchange?
Check updates on the currency conversion rates on a daily basis
Make the transaction from any RBI authorized dealer
Avoid banks and airports if you are not in a hurry