Importance of Currency Exchange Rate to Country
Importance of Currency Exchange Rate to Country
The exchange rate refers to the expression given to the national quotation of a nation's currency in relation to that of the foreign countries. It can also be defined as the currency of one country expressed in the currency of another country. For instance given that the US dollar has a worth of 10, 000 Japanese Yen, it therefore means that the exchange rate is 10,000. Incase a product is 50, 000 Yen then it means that it is 5 US dollars. Exchange rate is therefore viewed as a multiplier or a converter. There are importances attributed to these exchange rates.
Importance of Currency Exchange Rates to a Country
It is an important exercise since it helps in the conversion of one country's currency to another. This will eventually lead to international trade especially for buying and selling of goods and services or even if one wishes to transfer money from one country to another it would be easier. Taking an example of the agricultural sector, exporting earns a country a lot of money. For example in the US, the agricultural sector mainly depends on the overseas markets in its economy. 50 percent of its wheat is exported to foreign lands thus boosting its economy (Evans, 2009). It would be so difficult for the USA to trade if there was no currency converter system. In the other hand, it helps individual countries to be in a position to compare prices of items in various countries and so make a decision on where it wishes to purchase goods in that country or in another. Currency Exchange rate is an important factor contributing to competitiveness in the market since trading countries will be able to compare prices and therefore learn of strategies of attracting more customers to themselves. For example, in case the US dollar goes up in value, it will force those who import goods to pay more in order to purchase US goods and vice versa. When the value of a dollar is high it will therefore decrease the demand of the country's goods abroad since most countries might not afford thus will look for affordable markets. On the other hand also, if the dollar's value is high the US citizens will be in a position to purchase goods at a cheaper exchange prices. Apart from the business benefits, it is also important for those traveling abroad because it would be very difficult for them to undertake any money transaction while out of their countries. Many at times a country has sent out its officials probably to foreign land and therefore without their currency it would be difficult to access many facilities and services it the country.
Exchange rates are not only important to individual business people but also to a country. It will be able to determine the amount of imports and exports it can advocate for basing on the rates in the market. If the currency of that particular country becomes higher, then its goods will be expensive in the outside market and vice versa. China as a country is very competitive unlike USA it has never allowed its Yuan to appreciate. It has received much pressure from the USA but it has never altered its rates (Evans, 2009). In case a country has its exports in demand it leads to rise in the value of its currency therefore making more profits. The currency exchange also helps indirectly in the international unity through trading. Countries are able to attend international meetings probably political or business oriented as a result of easier accessibility. It would be difficult to come together if the currencies were unconvertible.
The exchange rate is very important in the business world. A country can be able to benefit a lot especially if the demands of its goods are high in the international market. The fluctuation in demand and supply helps in the competitiveness of various countries in the international trade. Exotic Rajasthan Tour: Make Your Trip Exciting Watch American Idol Season 10 Episode 17 In Hd Copy Explore Gorgeous Attractions of India with India Tour The London Dungeon Experience Patio Umbrellas ideal to Protection Heat during Summer Spring into the perfect Easter Hurghada City Sightseeing Tour and Shore Excursion From Safaga Port Miami Beach Condos – Important Things To Consider During Investment Choosing the right travel insurance policy for your holiday Reading and Leeds Festival 2011 Tickets will go on sale on Monday 21 March 2011 Planning a "Round the World" Trip Garden Club Lapel Pins Are Perfect For Spring Baseball Jerseys: Spring is Nearly Here and So is Baseball Season