Foreign Exchange Rate.

Definition of foreign exchange rate .

In which rate a currency of a county is turned & converted into another is called foreign exchange rate.

"Foreign exchange rate is the price relationship between the currencies of two countries."(Dictionary of Banking and Finance)

"The price of particular currency in terms of other currencies will changes, is known as foreign exchange rate." (D G Luckett)

The foreign exchange rate is the rate at which one country's money can be turned into another." (John Black)

"The rate of exchange between two countries is the amount of one currency that will be exchanged for one unit of another currency." (K C Shekhar)

At last according to the above definition it is said that,

* Exchange rate is the exchange ratio of the currency of two countries.

* A unit currency of a county will be turned into How many currencies of other countries is determined by the exchange rate.

* Received-payment of currency  depends on exchange rate.

* Exchange rate is changed with the changing of economic condition of a country.

Causes of fluctuation in the rate of exchange.

The ratio of turning the currency value between two countries is called the rate of exchange. The exchange rate of two countries is fluctuated due to the difference of demand & supply of more than one country's currencies. There are  many causes of fluctuating the exchange rate which are given below with details.

1. Condition of foreign trade :

If export is increased then foreign trade becomes favourable, more foreign currencies come in country, exchange rate is climbed up and vice versa.

2. Flow of capital :

If capital comes in county then more foreign currencies are entered & vice versa that means with the increasing -decreasing of flow of capital the rate of exchange is fluctuated.

3. Stock exchange :

More translations & the attendance or foreign companies in share market create the enhancement of stock exchange and less of that create oppose of that, means if foreign & countries purchasers buy more share then more foreign currencies enter into market, bull position of share market is created, exchange rate is augmented and vice versa.

4. Currency condition :

If the inflation is run up then the currency value is lessen and if  deflation is available then currency value & exchange rate is incremented. Thus, more inflation and deflation waste the balance of fluctuation of exchange rate.

5. Bank rate :

If the bank rate of a country is raised then more deposits to bank is accumulated, foreign trade becomes favorable, more foreign currencies come in county, the rate of exchange is enhanced.

6. Government currency policy :

The countries currency value is fluctuated through currency policy. If the currency policy is favorable of country then increasing the country's currency value, the exchange rate is climbed up and opposite reaction is created in opposite situations of that.

7. Foreign investment :

Foreign investment depends on investment policy & environment of a country. So, if the foreign  investment is picked up then foreign currencies come into, exchange rate is elevated and vice versa.

8. Political stability :

If the political condition of a country is stable then in a country the foreign investment is lift up, more foreign currencies come into, exchange rate is increased and in opposition the opposite reaction is exercised.

9. Price level :

When the price level in market is declined then the currency value is run up, exchange rate is lift up and vice versa.

10. Industrialization :

The value of currency is also climbed up due to industrialization and as a result being the favourable industrial environment of country, the supply of foreign currencies and exchange rate is incremented in a country.

11. International trade policy :

If the International trade policy come in a favorable position of country the foreign currencies are entered into. As a result the rate of exchange is elevated.

12. Interest rate :

In the increment of interest rate, huge foreign capital is invested due to more profit, exchange rate is  also enhanced and vice Versa.

13. Natural condition :

At the stability of natural condition the industry, business & commerce of a country is developed, entrance of foreign currencies is occurred and as a result exchange rate is drawn up also.

14. Sudden incidence :

Any sudden incidence is occurred or happened in country or at international stage, then exchange rate is climbed up. If such incidence isn't happened then economic development & stability will be run up, income will be enhanced and exchange rate will be lifted up.

15. International event :

If any International event goes on favorable position of a country then exchange rate is affixed and vice versa.

At last it is said that, the exchange rate can be increased & and; decreased in various reasons. But speculative businesses of currency, conditions of commodities market, international politics, various economic causes etc except the above described facts can impact & fluctuate to the exchange rate or foreign exchange rate.