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Articles

Currency Conversion Rate

Exchange rate is the value of the US dollar against that of other countries currencies. This rate determines how much we have to pay to import goods and services and how much we earn on export.

The demand and supply of a country’s currency determines its exchange rate. This is known as a floating exchange rate. Take dollar for example.

If the demand is more than the supply of dollar then the value will go up and if the reverse takes place resulting in the value going down. The currency projections vary accordingly.

If the currency projections show a higher rate of interest against investment in a country, then the investors will invest in that country.

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Hence, increase in the currency projections will increase the demand of the currency provided that the expected rate of inflation is not higher in the countries trading partners. When the reverse happens then the currency projections will show a fall in the demand of currency of that country.
 
Even if the currency projections show a higher interest rate, the investors would be interested if the inflation rate is high.

This is because inflation will erode the value of the currency as shown in currency projections. The currency projections will be true if inflation rates are good.

Trade balance affects the currency projections and a country's currency. If a country’s export price is on the rise this means the amount of export exceeds the amount of import and that affects the currency projections in favor of the country.

The value of a currency will rise in the currency projections when the market thinks that they will earn more if they invest in assets of that country.

The currency projections will show a lower rate when the investors don’t have a lot of faith in then countries economic progress.

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