Decoding the term "Foreign currency exchange rate"

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Before going to the topic, I like to thank the abilogic community for the opportunity to share my thoughts and ideas.

Now we will dive into the topic

The term Foreign exchange rate tells us the value of our money in terms of foreign currency like the US Dollar, Euro, and Dinar.

The Foreign Currency Exchange rate is not a fixed one, it is a constantly changing one for western countries but not in the case of the Gulf currencies Riyal are fixed one. A change in riyal indicates that there is a change Govt.

The Foreign Currency Exchange rate of 1 Rupee against 1 American dollar on 26 July 2019 is 0.014 of the American dollar, which means Rs. 68.97 of Indian money is equal to 1 American dollar.

Factors Affect the value of foreign currency are1) Interest rate, 2) Money supply and 3) Growth of the country.

What is Interest Rate?

The interest rate is the rate at which the central bank purchases the foreign currency.

What is Money supply?

The balance of moneys demand and supply should be a balanced one, if there is a change in the balance then it will lead to inflation.

Understanding growth of the country?

The growth of the country or the economy plays a major role in determining the exchange rate. A country with positive economic growth and financial stablity wil have a high exchange rate.

The Foreign Currency Exchange rate of 1 Rupee on the same day is 0.013 of Euro which means that if you want to buy chocolate of 1 Euro in European countries like France, Germany, Italy and other 16 countries you have to pay Rs.76.77.

The value of currency exchange tells us foreign currency in their reserves in their central bank. to have a cap on the fluctuating foreign currency rate, the central banks like RBI withholds certain amount of American dollars. If the value of Indian Rupees is low, the central bank of India, the Reserve bank of India sells the US Dollar to maintain the balance the Indian economy, in such a situation the value of American dollar falls.

Approaching Banks for foreign currency exchange is not the ideal one because they charge high service rates for currency exchange.

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