Foreign Exchange Rates

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An exchange rate is the value of a country’s currency.

Depreciation and Appreciation  the decrease and increase of a currency.

Changes in balance of trade in goods and services
Importing more than exporting which results in less exportation trade.

Inflation
When the inflation rate is high, the price of a country’s product rises faster than the foreign product, which results in uncompetitive goods for the country. High inflation tends to reduce the value of the currency.

Changes in interest rates
When a country’s interest rates are high or rising, foreigners may be keen to save or invest money in the country’s banks and other financial institutions.

The price of oil
When the price for oil is high, the currency of the country will benefit, but when it’s low, the price of oil will mean foreign countries will not have to pay so much for the country’s oil and the demand for the currency will fall.

Speculation
This is trying to make money by buying and selling foreign currencies to make speculative gains. For example, when a country’s currency is going to fall, the person or firm will sell it and buy another currency, which he then can, after a certain time, buy back to make a speculative gain.

The exports will decrease because of the expensive pricing (currency being high) for the trading country. E.g. countries now tend to import from the U.S. ($) which compared to the Euro (€) is weak – it’s cheaper to buy from the U.S.

The imports increase because of the cheaper pricing (currency being low) for...