Export exchange rate

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Influence of Exchange Rate Fluctuations on Exports Simply put, exchange rate movements affect exports in two ways. One, it is rate depreciation and the other is rate variability (risk). Where, depreciation raises exports on the other hand, its associated exchange rate risk can offset the positive effects. Depreciation lowers the foreign currency price or export exchange rates and this thereby increases the quantity of exports and the export revenue in domestic currency. Conditions may exist however where export revenue falls. Highly inelastic foreign import demand actually leads to falling export revenue. Ambiguity take precedence when export production incorporates high import content, since the domestic cost or price of exports rises with depreciation. At such times, appreciation and exporters tend to price to market, lowering their domestic currency price to maintain export market share. Few Short Term Reasons that Influence & Affect Forex Market Trading The forex market trading is not difficult and if one have a basic on when the foreign exchange of a country will change. The crux lies on how countries and their exporting as well as importing firms know that? Over a period of time it has been realised that the forex market gets affected by certain macroeconomic factors and we therefore bring out in this piece some factors that can has a direct bearing over the forex market trading.

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Political Landscape- The economy tends to grows when the government willingly takes steps to improve the living standard of its population. For such to happen, a stable government may be the first sign of an investor-friendly country. This also ensures that the economies have fewer roadblocks and higher chances to grow. This factor is important to forex market trading as traders mostly opt to buy currency of a country whose political conditions are stable. In this area, the perfect instances of foreign exchange trading include news of Brexit which led to a dive in the value of the GBP when compared to the US Dollar. Inflation Rate- Second factor which also has an influence on the exchange rate is the current inflation rate as it can also determine what would be say the export exchange rate today . There are no surprises there and if the country’s inflation rate is relatively lower in comparison to the other, its currency is expected to appreciate in value as compared to a currency with the higher inflation rate . Thinking of it from the logical point of view, inflation rate is related to forex market trading as investors would seek to buy a currency where the inflation rates are lower. For instance, if the currency inflation rises in Zimbabwe, its currency value automatically gets devalued aggressively. So in this case, you will find Zimbabwean dollar is not an attractive destination for Forex traders.

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Commodity Imports – As countries largely depend on commodity imports for domestic consumptions, its currency usually tend to fall. The increase in gold imports can result to trade deficit and this leads to depreciation in the currency. This can result in a sharp decline in the currency exchange rate . Long term factors that influence the forex trading trends include factors such like- Growth in Economy and Inflation- the forward movement of currency depends on the expectations of economic growth and inflation over a long period of time. The US economy suffered largely during the financial crisis in 2008. However, the global market pegs the US economy to be bullish which in turn is strengthening the Dollar index. As far as inflation is concerned, the Central bank will always target a lower range as higher inflation results in depreciation of the currency. Incentive Measures- The market sentiments for a strong currency changes when stimulus is rolled out to make up for capital deficit. More stimulus results in weaker exchange rate for that currency in the global market .

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CONTACT US Myforexeye Fintech Pvt. Ltd. Plot 135, Pocket 1 Jasola Vihar New Delhi 110025

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