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Currency is a monetary unit of any other country, as well as a calculated, generally accepted world unit, for example, the American dollar, pound sterling, euro.
The exchange rate is the ratio of two monetary units of different states, that is, a certain amount that is paid by one monetary unit to buy another. The exchange rate is important for calculations between states and indicates a certain parity of purchasing power. This means that the price of a certain product must be the same in the number of monetary units, but in different currencies. For example, a Samsung phone costs 114 rubles. with a dollar-to-ruble ratio of 990:72,83 ruble, its value will be $1.
How the course is formed
The exchange rate closely interacts with the convertibility of the currency. This is the ability of any monetary unit to be easily exchanged for other monetary units. It depends on certain restrictions that the state can impose on certain currency operations and is divided into:
1. On convertibility in the present time.
2. On the convertibility of money transfers.
The first type is necessary for carrying out various trade operations (usually it is import/export), and the second type is for free exchange between certain countries.
If the monetary unit of one state is easily converted into the currency of another state, it is freely convertible.
What does the exchange rate depend on?
Practically exchange rate of Kyiv currency affects all citizens. For example, the growth of the exchange rate causes inflation, while its stability is beneficial to investors who need their investments to bring them profit. Therefore, in order to profitably invest your capital, you need to know what can affect the fall and jumps in the exchange rate. And ego changes depend on:
1. Economic status of the country to which the currency belongs. The main indicators of the economy include GDP, unemployment and inflation rates, and the economic balance (although some economic indicators also depend on the exchange rate). For example, if a country has a strong economy, it exports many of its goods, attracts foreign investors - the demand for its national currency is constantly increasing, and naturally the rate of its monetary unit rises.
2. Work of state banks. By buying foreign currency and putting it into circulation, using their cash reserves, national banks maintain a high rate of their national monetary unit.
3. Movement of capital. With a large demand for foreign currency within the country, it leads to a drop in the exchange rate of its national currency. currencies That is, foreign monetary units become more expensive in relation to their currency.
4. The trust that domestic and world markets place on a certain currency. In this case, the classic rule works - the lower the demand, the lower the price.
It is quite difficult to compile a complete list of factors affecting the exchange rate change. It is possible to include the state's reputation on the international arena, its relationship with neighboring countries, its investment attractiveness and many other factors.
