The value of a currency is determined by the supply and demand of the currency in that particular country. When a currency of a particular country is high in demand by the traders, tourists travellers, investors and so on the value of the currency automatically increases. Here are some of the factors that have both negative and positive impact in the value of the currency of a particular country.
Increase in the interest rates indicates high demand for the currency. Higher interest rates do attract several foreign investors, as they prefer currency with higher interest rates and tend to invest more in them. This process can be compared with the process of looking for banks that provide you with higher interest rates when you have a savings account with that particular bank. Higher interest rates increase demand for the currency and its results in the increase in the value of the currency.
This does benefit in the increase in sales of the US companies, which in turn creates opportunity for more jobs and consumer spending. As the economy of a country fails the trading decreases, weakening of the value of the currency also helps to counter the trade deficit, which is considered as the most troublesome aspect of US economy.
It also helps to increase foreign investments and there are different methods through which the foreign investments can help the US economy and to have a stable value of the currency or US dollar. Over the past few years, it is found that there are several foreigner buyers that have shown interest in the US real estate. Studies by NARs also suggest that every one of the five real estate agents sold a house to a foreign buyer.
Once a country is hit with inflation or currency crisis then it is likely to occur again. So, when this happens in US, the Federal Reserve decreases the interest rates. This did happen in the late 90s after which US had to go through crisis.
Wars does drain economy, it does possess a major threat to a country's economy. Wars are expensive and the expenses cost in the war is paid by the taxpayer itself. Wars do affect the growing economy of a country, there is no economic growth found during in a country during a war, thus it lowers that value of the currency.
Unnecessary expenditure done by the government also affects the economy of the country. If the government keeps spending money in programs which are not necessary but costs a lot of money, does affect the value of the currency. The larger the government grows the more the value of the currency reduces.
In order to ensure the value of the currency is high, it is important to have a good economic growth. When there is a reduction in the house market, there is also a decrease in the seller price too. When people realise that the cost has decrease, buyers tend to spend less, resulting in reduced consumer spending. Hence it has direct effect on the economy of the country, reducing the value of the currency.
Increase in the interest rates indicates high demand for the currency. Higher interest rates do attract several foreign investors, as they prefer currency with higher interest rates and tend to invest more in them. This process can be compared with the process of looking for banks that provide you with higher interest rates when you have a savings account with that particular bank. Higher interest rates increase demand for the currency and its results in the increase in the value of the currency.
This does benefit in the increase in sales of the US companies, which in turn creates opportunity for more jobs and consumer spending. As the economy of a country fails the trading decreases, weakening of the value of the currency also helps to counter the trade deficit, which is considered as the most troublesome aspect of US economy.
It also helps to increase foreign investments and there are different methods through which the foreign investments can help the US economy and to have a stable value of the currency or US dollar. Over the past few years, it is found that there are several foreigner buyers that have shown interest in the US real estate. Studies by NARs also suggest that every one of the five real estate agents sold a house to a foreign buyer.
Once a country is hit with inflation or currency crisis then it is likely to occur again. So, when this happens in US, the Federal Reserve decreases the interest rates. This did happen in the late 90s after which US had to go through crisis.
Wars does drain economy, it does possess a major threat to a country's economy. Wars are expensive and the expenses cost in the war is paid by the taxpayer itself. Wars do affect the growing economy of a country, there is no economic growth found during in a country during a war, thus it lowers that value of the currency.
Unnecessary expenditure done by the government also affects the economy of the country. If the government keeps spending money in programs which are not necessary but costs a lot of money, does affect the value of the currency. The larger the government grows the more the value of the currency reduces.
In order to ensure the value of the currency is high, it is important to have a good economic growth. When there is a reduction in the house market, there is also a decrease in the seller price too. When people realise that the cost has decrease, buyers tend to spend less, resulting in reduced consumer spending. Hence it has direct effect on the economy of the country, reducing the value of the currency.
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