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What are the political factors that affect fluctuation of exchange rate?
Wiki User
∙ 12y ago
I am assuming that you are asking what makes one countries currency is worth less then another, well with many countries paper currency is used which actually has no value in itself but is a note stating what it is worth and the person who accepts it must take your word on that. Often if a country were to default or lose the trust of the other nations then no one would have any stock in our currency thus making it worth nothing to other people. This problem can be avoided with coins that have actual value themselves for instance silver dollars which are actually composed of silver, or the original pennies which were made of copper and worth about 7 cents rather then the penny they were passed off as.
Wiki User
∙ 12y ago
Political factors that can affect the fluctuation of exchange rates include government stability, political events or crises, trade agreements and tariffs, government intervention in currency markets, and geopolitical tensions. Changes in political leadership, policies, or relationships with other countries can influence market sentiment and impact exchange rate movements.
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