Exchange rate today - Don´t panic, read - Eaglesinvestors. reasons the dollar is so strong

The exchange rate today is volatile and unpredictable for reasons that are justifiable. Then again who would expect otherwise? One moment you think that the conditions are favourable, the next minute something pops up in the news that changes the exchange rate drastically.

However, to understand and be more critical of the constantly changing exchange rates you need to know what exchange rates are concerning.

Exchange rate today

What is the exchange rate?

Exchange rates determine the value of a currency in another foreign currency. We can say that it is more like how much it would cost to buy another foreign currency with your money. Let’s treat it as a commodity for example, if there is a choice between Colgate and fresh aqua toothpaste.

If for some reason aqua fresh gives the best results and the demand for it goes up, its price will also rise. It is the same with currencies; if demand is high for a particular currency, usually the value of the currency will increase.

Exchange rates today and what affects them

For most of the currencies, the exchange rate is determined by foreign exchange traders. These are individuals that are continually trading currencies around the clock. Considering the inevitable fluctuation of the exchange rate most people make it a habit of using the currency converter on a daily basis to see what the value of their currency is against another.

Exchange rates today

Inflation on exchange rate today

Generally, a low and consistent standard of inflation is favourable because it indicates the rise of the currency value as the purchasing power relatively rises in comparison to other currencies. However, companies with much higher inflation see a decrease in their currency value — hence higher interest rates.

The interest rate on the exchange rate today

The interest rate that a country pays through its central bank is critical. The interest rate determines the value of the currency, the higher it is, the greater the value of the currency. Investors are more interested in the currency that pays more. Such that as it is saved in that country’s bank account, they can benefit from a higher interest rate.

Economic growth and political stability on the exchange rate today

When foreign investors are looking to invest their capital, it is inevitable that they search for countries that have a strong economic performance as well as financial security. A combination of all these great qualities instinctively diverts investment funds from the countries that are riskier in these areas.

The public debt on exchange rate today

Countries get involved in enormous deficit while trying to finance public sector projects as well as government funding. These kinds of activities excite the domestic economy; however, for foreign investors, this is a huge turn-off. Reason being that big dept enforce inflation. When inflation is high, the debt becomes serviced and paid off using real dollars that are cheaper in the long run.

Terms of trade on exchange rate today

Terms of trade are represented by a ratio that compares an export price to an import price, with the balance of payments as well as current accounts. Let us assume that a country ’s export prices have risen at a much higher rate than the cost of imports. Meaning their terms of trade have made a significant improvement. A countries exports are evidently in higher demand when the terms of trade increase.

Overall this will result in exports giving more revenue, which brings about a higher demand for the country’s currency, thereby increasing the value of the currency. Moreover, if the export price goes up more than the imports’, the value of the currency will deteriorate as compared to trading partners’.

The inevitably consistent rising and falling of currencies all over the world can seem like an endless roller-coaster ride. With some sudden gut-wrenching falls. 2017 was the year US dollar was heading south, experiencing its worst year in a decade. Meanwhile, the euro and the British pound were enjoying the view from the top.
Nevertheless the exchange rate today defines the dollar as one of the strongest currencies in the world.

currency exchange today

By exchangerateiq

3 reasons why the dollar is so strong today

With the improvement of the monetary policy, the expansive monetary policy was terminated. Since it was no longer adding to the money supply, the supply of the dollar was constrained increasing its value. Interest rates were also raised in 2015 by the Feds, strengthening the dollar.

Secondly – the currency value of the euro went down when the European central bank did the exact opposite. The political instability of the European Union also aided in the weakening of the euro value. The exchange rate euro to dollar proves how the euro did against the US dollar in the past. Every time the euro weakens, the strengthening of the US dollar is automatic.

Lastly- forex traders took advantage of this exchange rate comparison. They used influence to weaken the euro even more and make the dollar stronger.

The euro exchange rate today

The exchange rate for the euro is very flexible. That means that changes in its exchange rates happen every single day. Because it is on the foreign exchange market that the euro is traded. The main factors that affect the value of the euro include;

  • The interest rate benchmarks of the central banks
  • The strength of the European economy
  • Investors taking note of dept.

Exchange rate today – currency rate pound to euro

The pound is the United Kingdom’s official currency and is the oldest currency in the world, that is still in use today. It is number four on the most traded currencies on the forex markets. The historical exchange rates of the pound to euro show that the pound has trade premium to the euro. As the euro formally entered as part of the first 11 Eurozone countries between 1999 and 2002. The pound value was ranging from 1.567 to 1.73 euros.

However, due to the effect the 2008 recession had on the British economy, the pound did not do so well against the euro.

With every currency, you must avoid being vulnerable to the unexpected shifts of the exchange rate today. Because no one can predict what will happen next, not even experts. If stock market performance is so difficult to predict, imagine how much harder second–guessing currency changes would be.

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