Monday, September 2, 2013

CURRENCY EXCHANGE RATE

Introduction
The emergence of globalization has resulted in the establishment of economic growth across all the economies of the world. In the wake of this development, the aspect of international trade has been adopted as the incentive for increasing the scope of development. Ideally, the aspect of foreign exchange is an integral factor that enables the conduction of international trade. Generally, exchange rates or foreign-exchange rate can be denoted as the rate at which one currency of given nation will be exchanged for another country (Lucio Sarno, 2002). This factor is essential because it highlights the value of one nation’s currency when compared with the currency of other countries. The brief comparison of various global currencies is highlighted through the help of the currency convert. The converter shows that $1 is equivalent to ARS 5.4230. Further information regarding the volatility and the information relating to the aspects of the differences in the currency exchange is presented as follows.

From the graph above, it is evident that the value of the foreign currencies generally fluctuates with regard to the emerging demand and supply factors in the market. The fixed exchange rate given by the American dollar has been accorded the aspects of increased market operation because of its stability. It is used in identifying the variations in the market.

Over the period, critical research in the market has shown that the aspects of exchange rates in the market can vary based on the policies adopted in the market. Some of the leading variations in foreign exchange rates can be presented as fixed currency and fluctuating currency (Lucio Sarno, 2002). Generally, fluctuating currency exchange rates can be identified as the type of the exchange rate that involves the fluctuation of the currency with regards to the exchange market. Majority of the global economies have adopted the aspect of fluctuating economies and they include the euro, British pound, Japanese yen and the Australian dollar amongst others. The results of the market survey have also shown that the aspect t fluctuating currencies have been adopted in the leading trading activities.

On the other hand, other nations have adopted the usage of fixed currency system. This system holds that the government must employ factors and policies for maintaining the value of the currency against other currencies in the market. Furthermore, the government of the country must ensure that the leading factors are enacted to determine the net worth of the currency with regard to fixed weight of gold or the usage of another currency (Lucio Sarno, 2002). Finally, the central government of the country with the fixed currency must enact measures aimed at selling and buying currencies at fixed price.

Currency observation and implication
The information form the market has shown that there are different currencies in the market that have been labeled as fixed currency and fluctuating currency. One of the leading fixed currencies identified is the American dollar while there are a range fluctuating currencies like Jamaican dollar, the euro and Mexican peso amongst others. The observation results form the market has highlighted the changes in the values of the currencies are effected by the onsets of changes in demand and supply in the global market.

Critical observation of the Jamaican dollar for a period of to days revealed a change from 100.750 on July 22, 2013 to the new figure 99.9520 on July 23, 2013. This change represents the strengthening of the Jamaican dollar against the American dollar.

Mexican peso is another currency that experiences fluctuation in the market given by transition from 12.5363 on July 22, 2012 to the new figure 12.5007 on July 23, 2013. This fluctuating is also ideal and it shows the capacity of strengthening in the Mexican peso because it increases the scope of development within the economy.

The observation conducted on the two currencies has shown that the floating went down thereby leading to the increases in the benefits for the person ordering supplies. When the float goes down, the peso ordering suppliers will have the factor of paying less fir the products rather than paying higher amount of local currencies for the same commodities (Lucio Sarno, 2002). In the view of the above illustrations, it is evident that the businessman will pay more when goods or the suppliers are ordered in July 22, 2012. On the other hand, the businessman will pay less for the commodities and purchases initiated when floating has reduced.

The fluctuation of foreign exchange rates is very significant for the conduction and profitability of business because it helps in determining the critical value for the investors. This factor is essential in influencing the prices of the commodities services in the industry thereby leading to the choice of investments for the investors. Certainly, increase in the demand of a particular currency results in the increase in the price of this currency (Lucio Sarno, 2002). On the other hand, when the country suffers the blow of economic slowdown, the investors will loose confidence and the value of the currency will reduce. In reality, this factor is extremely essential for the traders and it helps in the realization of marginal benefits for the investors in the economy. Therefore, foreign exchange is an extremely significant factor that helps in the realization of increased benefits and growth of the economy.






References Lucio Sarno, M. P. (2002). The Economics of Exchange Rates. United States: Cambridge University Press.