Foreign Exchange

FOREGIN EXCHANGE

A country’s currency value also may be fixed by the country’s government. However, most countries Float their currencies freely against those of other countries, which keeps them in constant fluctuation.The value of any particular currency is determined by market forces based on trade, investment, tourism, and geo political risks. Every time a tourist visits a country, for example, he or she must pay for goods and services using the currency of the host country. Therefore, a tourist must exchange the currency of his or her home country for the local currency. Currency Exchange of this kind is one of the demand factors for a particular currency. Another important factor of demand occurs when a foreign company seeks to do business with a company in a specific country. Usually, the foreign company will have to pay the local company in their local currency. At other times, it may be desirable for an investor from one country to invest in another, and that investment would have to be made in the local currency as well. All of these requirements produce a need for foreign exchange and are the reasons why foreging exchange marketers are so large.

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