Floating Exchange Rates

BZ
by Batyr Zhangabylov4 views·Updated Jan 10, 2022
Re-use contentCreate your own

Chapters

Audio TranscriptAuto-generated

  1. something.
  2. The floating rate is usually determined by the open market to supply and demand.
  3. Therefore, if the demand for the currency is high, the value will increase.
  4. To maintain the exchange rate,
  5. the government will buy and sell its own
  6. currency against the currency to which is pegged.
  7. Oh, that's good.
  8. Uh,
  9. the potential cause for the appreciation of depreciation of
  10. currency can be the foreign demand for countries exports.
  11. So if other countries are in high demand for the export of this country,
  12. then there was a lot more of their currency
  13. which would intern appreciate the currency and vice versa.
  14. If demand is low
  15. and another reason is the domestic demand for imports.
  16. As the consumers within the country demand for imports from other countries,
  17. they would want to
  18. sell their own currency, which would
  19. increase the supply and shift the supply
  20. to the right, which would
  21. actually lower the price
  22. of the currency leading to depreciation and vice versa.
  23. In the case of domestic demand for imports being low,
  24. another reason is the relative interest rate.
  25. If it is quite high than other countries would want to invest into the currency. US.
  26. Appreciating the currency of the country.
  27. And in the case where relative interest rate is low than less,
  28. number of countries would want to invest
  29. into that currency leading to depreciation.
  30. Another reason is
  31. investment from overseas into the country's firms
  32. and similarly to other factors here.
  33. If the investors believe
  34. difference will do well in the long run,
  35. there's a lot of speculation going on here as well.
  36. Then they will invest into the currency of this country, leading to appreciation.
  37. And
  38. if the investment is rather low than this
  39. will lead to depreciation of that currency.
  40. Some countries fix our currencies to align with those from other countries,
  41. usually bigger economic power.
  42. For example, $1 billion is worth about 50 cents or 0.5 U. S. Dollars.
  43. This is in order to attract foreign investment, particularly from the U. S. A.
  44. And Barbie in Barbados main export of tourism.
  45. This is also done in order to make imports
  46. cheaper if the demand is decreased significantly than the
  47. government was forced to either Bible money for
  48. their foreign currency reserves or their forest reserves,
  49. or increased the interest rates in order to attract more demand from abroad.
  50. If demand increases,
  51. then the government can decrease the interest rates
  52. as well as cell money from the forest reserves
  53. in order to maintain the monitor relationship the bar billion dollar has with the U.
  54. S. Dollars.
  55. Yeah,
  56. In the case of a fixed exchange rate,
  57. countries can find themselves in either
  58. having that currently undervalued overvalued,
  59. which has it's own president.
  60. For example,
  61. advantages of undervalued currency can be that now exports becomes cheaper.
  62. As other countries,
  63. it becomes cheaper for other countries to purchase the export of this country,
  64. making them more competitive.
  65. And the international market
  66. more over foreign investment from abroad becomes cheaper
  67. as the currency is not not a strong,
  68. and this makes it easier for the investors
  69. to invest into the currency of this country.
  70. And another advantage is since now the imports become more expensive.
  71. It
  72. quite often protects domestic firms and domestic jobs within the country.
  73. Yeah,