subject: Currency Rates Talks A Volume About Itself [print this page] Currency rates are fixed conclusively or authoritatively by the relative value of one of the given currency in terms of supply and demand for which particular given currency. It basically involves facts or principle which is related to movements in international open trade and also relate to the process of perceiving of those who trade in the currency market place.
In the present scenario, there is an industry which is emerging in the surrounding of the prediction of movements in the given currency rates. It is conducted with a view to earn profit with the on-going trade. Anyway there is always an element of chance regarding what determines a currency rate. This we can see in the ways a trader behaves while conducting the trade on a particular day.
In general, currency rates are based on the actual relative power positions of a given one currency as compared with another, it is believed to be sable over a period of time or usually will have tendency to move according to the predictable reasons.
For example, it is usually expected that the currency pair of Australian Dollar and US Dollar will normally move towards parity. It may be at the end of the financial year as a result of existing relative market strength of the two countries in the open market.
In the present market, one can observe there are peaks and troughs that entirely relates to immediate supply and demand for the given currencies involved in the trade. It is believed that a strong currency is the one where the country which issues the currency generally holds an effective and efficient position in the international market. It is also seen in the international market that a particular currency rates will normally stay firm and have a tendency to appreciate against the given other currencies where there is felt a strong demand for the currency of a specific country.
It is generally felt that a strong demand for any particular currency is related to that country being active in the export market and also to people wanting not only the products of a country, but to invest in that countrys assets.
In an economy, investment capital can be attracted towards that particular country then it is strong enough in maintaining relatively high interest rates as compared to other countries. This in turn creates a high level of great demand for that currency so that large investment is possible. When a country maintains a high interest rate then it will be possible to attract foreign investment and it enables to keep the currency strong enough for a longer period of time.
