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Benefits of Currency Exchange Rate to a Certain Country
During trading activities in the field of business there are terns that you will hear such as currency exchange rate. This is the value of a certain countries currency that can be exchanged with currency from another country. The market trends of a particular country will determine the currency value hence making it go up or down. Inflation, trade balance, political stability, general state of the economy of a particular country and many more are some of the factors that influence the currency exchange rate of a particular country. These factors are important in that they impact on the exchange rate positively resulting to better currency value. Currency exchange rate is important to the economy of you country in the following ways.
Healthy competition among countries is created by currency exchange rate. Currency exchange rates change daily making it possible for a country to monitor the value of their country compared to that of another country. For their currency value to go up, they will have to make positive changes. With the value of their currency being up, makes them bring in more profits than losses. For a country to be able to maintain the value of their currency or even to increase it, they will have to make changes in the market daily.
Currency exchange rate can be a factor that determines the political stability of a certain country. It is those countries that are politically stable that their currencies are stable and valuable in the market. Politically stable countries have got stable markets that will in turn help stabilize and increase the currency value of a certain country. The market will be affected by a drastic drop of the currency value of a certain country. Inflation will occur, affecting all members of the public. With such a concept in mind, countries always strive to maintain a high degree of transparency among leaders and understanding so that they become stable.
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Trade balance can be maintained by the exchange rate of a particular country. Maintenance of pricing of goods and services is possible with trade balance. Calculation of imports versus exports is trade balance. A trade imbalance occurs when there are lots of goods being imported than those being exported. To cater for the production cost of goods that, there will be a hike in prices because of trade imbalance. Exchange rates will try to maintain trade balance for the value of the currency to also be maintained.
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In summary, it is the currency exchange rate that monitors all the activities in the market. Any activities that are not right cause a negative impact which must be maintained by doing the right thing.