Why Do Exchange Rates Fluctuate?

Why Do Exchange Rates Fluctuate?

Exchange rate is one of the determinants whether the economy is doing well or not. If investors are happy and doing well in a particular country with their business, then most probably the value of a country’s currency against the US dollar will also be low, meaning to say everything is doing well.But if the value of a country’s currency is quite high against the US dollar then this simply means that the economy is in chaos due to many factors.

Generally, the fluctuation of exchange rates depends with the selling and buying of currencies worldwide. For example if we are evening here and the other country is morning the usual rate of this particular currency is this but if the shift of day changes let us say it is evening here and morning in another part of the world, then most probably the exchange rate will fluctuate or change with it.

Interest rate generally determines the fluctuation of exchange rate and if this interest rate movement will continually be unstable in going down for instance, then this would mean to say that the economy is ailing and the business sector might be doing all the best they can to solve the problem lest they will enter into bankruptcy. If the government would not come to the rescue of the fluctuation of the exchange rate then the country will eventually suffer. Prices of the basic commodity starting from oil and gasoline will rise and the fare as well will be affected and everything will follow.

Economic status or data such as the problem in the government that may cause uprising will also affect the exchange rate to fluctuate. This is the bad part of business. If you are not ready to face these unforeseen events and once the exchange rate fluctuates your business will surely suffer and the entire society as well.

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