Banking
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Currency Conversions

What factors determine exchange rates?

Answer

Wiki User
09/13/2011

The Factors that determine exchange rates is>>(in short)

1) Gold Reserves- Country that has enough gold is more strong)

2) Import/Export- If Country doing more Import,they pay in their currency and that currency get strong so more export more strong the countries currency.

3) Foreign Investments- Foreign investors investing in ur country>Selling their currency and buying ur currency>Investing>gaining profits.So ur currency appreciates.

4) Inflation- Lower Inflation Higher Currency Value

5) Public Debt- More Debt NO Foreign Investement because Ur Country has Already lots of debt and so lots of Defaulters.

6) Political Stability- Country with stable government will allow more foreign investors.(for stable rules,new government new rules,and so effecting foreign investors.