An exchange rate is the value of one country’s currency relative to another. It fluctuates based on market conditions, supply and demand dynamics, and the overall state of each country’s economy.
Why Exchange Rates Change
Exchange rates move in response to a range of economic factors—trade volumes between countries, interest rates, inflation, and political developments. Central bank monetary policy also has a direct impact on currency values.
Why Exchange Rates Should Be Monitored
Exchange rates matter most to companies engaged in international trade. Rate shifts can affect costs and compress profit margins. For investors, tracking exchange rates is essential for identifying and acting on opportunities.
