Feb
12
Currency pair exchange rate is the value of US dollar against other currencies of different countries. The exchange rate of a country is largely affected by supply and demands of its currency in the international market of currency exchange. If the demand of the currency exceeds the supply, then its value will go up but if supply exceeds the demand, then obviously the value goes down.
The interest rates also affect the currency pair exchange rate. This is obvious that if the interest rate is lower in a particular country, then investors will not invest in that country and the demand for its currency will decrease. Inflation rate also plays an important role in determining the exchange rate of a currency pair. If inflation is higher in a particular country, then the investors will not invest in it even if the interest rates are higher. Another factor that affects the country’s currency rate is trade balance. If the cost of the exports rises in relation to the imports, then its demand will increase and thus have an effect on its exchange rate.