Issuu on Google+

A Look at the Industry of Worldwide Exchange Rates Within the foreign exchange business, one can be able to gain profits by way of purchasing and selling currencies in a way that any fluctuations present in the prices will instead help you earn a significant amount of cash. Hence, it is quite necessary to gain an understanding regarding the nature of foreign exchange rates for the success of a foreign exchange business, considering that it is a bit complicated matter, even though it might seem simple on the surface. Taking a look at history As a matter of fact, you can find a rich history behind foreign exchange rates, hence you should understand how important it is to understand why such things happen the way they do within the forex market. Other than that, it is also of equal importance to be educated enough in making the right decisions to be able to capitalize on your knowledge. In order to understand foreign exchange rates, it is important to know what they actually are. By definition, foreign exchange rates are the value of a certain currency in relation to a particular secondary currency. Hence, once the exchange rate between 2 currencies is listed as the first currency taking 1.20 of the second currency, then the foreign exchange rate would be 1:1.2. Other than that, you have to understand why the values of currencies differ from one another. This can be best explained by the fact that right after the valuation of currencies around the world moved from the gold standards, the prices of currencies started to get pegged against the US dollar, with other currencies fluctuating upwards or downwards in relation to the US dollar currency. This marked the beginning of Worldwide Exchange Rates, and has been referred to as fixed exchange rate since then. With the changes in the method in which the trade is done, the fixed exchange rates along with the gold standard were abandoned, thus causing the forex exchange rates to be known as fluctuating exchange rates. In essence, one the forex exchange rates are affected by the markets forces, and once the demand for a particular currency goes beyond its supply, then it is expected that the forex exchange rates will rise for that currency being demanded, while the opposite would take place once demand falls. Now that the US dollar has become the base currency in the forex trading industry, all the US government has to do is to simply print additional dollars then sell them to various countries through debts. However, with the increasing prices of oil and the appearance of stronger world economies, the US dollar has been starting to lose its value as well as its dominance in the foreign exchange market little by little. As being the market which influences the world economy, it is no longer surprising that forex trading and currency exchange have experienced a massive growth in terms of volume and value as currencies were allowed to freely float against one another.