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Hello, I am Muhammad Khan and Welcome to my Padlet wall. Today we will be tackling the topic of exchange rates and the factors that affect them.

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Website 1 - Key Factors Influencing Exchange Rates

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Website 1 - Key Factors Influencing Exchange Rates

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On the following website I found some very relevant information regarding exchange rates. It states that there are 6 main key factors that directly affect a currencies exchange rate regardless of what currency it is and/or how strong it is. In addition, the strength of a countries currency exchange rate is a clear indication of the countries current economic health. It is for this very reason that the government is always trying to manipulate the exchange rate in order to best benefit the country. In general if a country is strong it makes it cheaper to import goods from other countries but also, the foreign markets whom it exports to have to pay more for goods.  This website was chosen since it summarizes the factors influencing exchange rates quite simply.

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Aside from factors such as interest rates and inflation, the currency exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures. But exchange rates matter on a smaller scale as well: they impact the real return of an investor's portfolio. Here, we look at some of the major forces behind exchange rate movements.

Before we look at these forces, we should sketch out how exchange rate movements affect a nation's trading relationships with other nations. A higher-valued currency makes a country's imports less expensive and its exports more expensive in foreign markets. A lower-valued currency makes a country's imports more expensive and its exports less expensive in foreign markets. A higher exchange rate can be expected to worsen a country's balance of trade, while a lower exchange rate can be expected to improve it.

Numerous factors determine exchange rates. Many of these factors are related to the trading relationship between two countries. Remember, exchange rates are relative, and are expressed as a comparison of the currencies of two countries. The following are some of the principal determinants of the exchange rate between two countries. Note that these factors are in no particular order; like many aspects of economics, the relative importance of these factors is subject to much debate.

Typically, a country with a consistently lower inflation rate exhibits a rising currency value, as its purchasing power increases relative to other currencies. During the last half of the 20th century, the countries with low inflation included Japan, Germany and Switzerland, while the U.S. and Canada achieved low inflation only later. Those countries with higher inflation typically see depreciation in their currency in relation to the currencies of their trading partners. This is also usually accompanied by higher interest rates.

Interest rates, inflation and exchange rates are all highly correlated. By manipulating interest rates, central banks exert influence over both inflation and exchange rates, and changing interest rates impact inflation and currency values. Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise. The impact of higher interest rates is mitigated, however, if inflation in the country is much higher than in others, or if additional factors serve to drive the currency down. The opposite relationship exists for decreasing interest rates - that is, lower interest rates tend to decrease exchange rates.

The current account is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services, interest and dividends. A deficit in the current account shows the country is spending more on foreign trade than it is earning, and that it is borrowing capital from foreign sources to make up the deficit. In other words, the country requires more foreign currency than it receives through sales of exports, and it supplies more of its own currency than foreigners demand for its products. The excess demand for foreign currency lowers the country's exchange rate until domestic goods and services are cheap enough for foreigners, and foreign assets are too expensive to generate sales for domestic interests.

Countries will engage in large-scale deficit financing to pay for public sector projects and governmental funding. While such activity stimulates the domestic economy, nations with large public deficits and debts are less attractive to foreign investors. The reason? A large debt encourages inflation, and if inflation is high, the debt will be serviced and ultimately paid off with cheaper real dollars in the future.

In the worst case scenario, a government may print money to pay part of a large debt, but increasing the money supply inevitably causes inflation. Moreover, if a government is not able to service its deficit through domestic means (selling domestic bonds, increasing the money supply), then it must increase the supply of securities for sale to foreigners, thereby lowering their prices. Finally, a large debt may prove worrisome to foreigners if they believe the country risks defaulting on its obligations. Foreigners will be less willing to own securities denominated in that currency if the risk of default is great. For this reason, the country's debt rating (as determined by Moody's or Standard & Poor's, for example) is a crucial determinant of its exchange rate.

A ratio comparing export prices to import prices, the terms of trade is related to current accounts and the balance of payments. If the price of a country's exports rises by a greater rate than that of its imports, its terms of trade have favorably improved. Increasing terms of trade shows greater demand for the country's exports. This, in turn, results in rising revenues from exports, which provides increased demand for the country's currency (and an increase in the currency's value). If the price of exports rises by a smaller rate than that of its imports, the currency's value will decrease in relation to its trading partners.

Foreign investors inevitably seek out stable countries with strong economic performance in which to invest their capital. A country with such positive attributes will draw investment funds away from other countries perceived to have more political and economic risk. Political turmoil, for example, can cause a loss of confidence in a currency and a movement of capital to the currencies of more stable countries.

The exchange rate of the currency in which a portfolio holds the bulk of its investments determines that portfolio's real return. A declining exchange rate obviously decreases the purchasing power of income and capital gains derived from any returns. Moreover, the exchange rate influences other income factors such as interest rates, inflation and even capital gains from domestic securities. While exchange rates are determined by numerous complex factors that often leave even the most experienced economists flummoxed, investors should still have some understanding of how currency values and exchange rates play an important role in the rate of return on their investments.

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Aside from factors such as interest rates and inflation, the currency exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world.

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Website 2 - How International Exchange Rates are Determined

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Website 2 - How International Exchange Rates are Determined

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The website linked below describes the manner in which international exchange rates are set and determined. It states that the price of a certain currency is strongly influenced by the demand of that currency by another . For example, if everyone in Canada were to buy Australian Dollars it would cause the price of the Australian Dollar to skyrocket in relation to the Canadian Dollar since the demand is high. There are many factors which give rise to the daily fluctuation of a specific exchange rate. A high inflation rate, high unemployment and low GDP all contribute to a weaker currency since investors shy away from countries like those. I believe this website is useful since it furthers ones knowledge about exchange rates without excess technical verbiage.

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International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency exchange rates can be floating, in which case they change continually based on a multitude of factors, or they can be pegged (or fixed) to another currency, in which case they still float, but they move in tandem with the currency to which they are pegged.

Knowing the value of a home currency in relation to different foreign currencies helps investors to analyze assets priced in foreign dollars. For example, for a U.S. investor, knowing the dollar to euro exchange rate is valuable when selecting European investments. A declining U.S. dollar could increase the value of foreign investments just as an increasing U.S. dollar value could hurt the value of your foreign investments.

Floating rates are determined by the market forces of supply and demand. How much demand there is in relation to supply of a currency will determine that currency's value in relation to another currency. For example, if the demand for U.S. dollars by Europeans increases, the supply-demand relationship will cause an increase in price of the U.S. dollar in relation to the euro. There are countless geopolitical and economic announcements that affect the exchange rates between two countries, but a few of the most common include interest rate changes, unemployment rates, inflation reports, gross domestic product numbers, manufacturing data, and commodities.

Generally, the more dependent a country is on a primary domestic industry, the stronger the correlation between the national currency and the industry's commodity prices.

There is no uniform rule for determining what commodities a given currency will be correlated with and how strong that correlation will be. However, some currencies provide good examples of commodity- forex relationships.

Consider that the Canadian dollar is positively correlated to the price of oil. Therefore, as the price of oil goes up, the Canadian dollar tends to appreciate against other major currencies. This is because Canada is a net oil exporter; when oil prices are high, Canada tends to reap greater revenues from its oil exports giving the Canadian dollar a boost on the foreign exchange market.

Another good example is the Australian dollar, which is positively correlated with gold. Because Australia is one of the world's biggest gold producers, its dollar tends to move in unison with price changes in gold bullion. Thus, when gold prices rise significantly, the Australian dollar will also be expected to appreciate against other major currencies.

Some countries may decide to use a pegged exchange rate that is set and maintained artificially by the government. This rate will not fluctuate intraday and may be reset on particular dates known as revaluation dates. Governments of emerging market countries often do this to create stability in the value of their currencies. To keep the pegged foreign exchange rate stable, the government of the country must hold large reserves of the currency to which its currency is pegged to control changes in supply and demand.

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How Are International Exchange Rates Set?

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International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency exchange rates can be floating, in which case they change continually based on a multitude of factors, or they can be pegged (or fixed) to another currency, in which case they still float, but they move in tandem with the currency to which they are pegged.

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This website contains information regarding information related to exchange rates, what exactly they are and what they mean to people. Basically an exchange rate is the value of one foreign currency compared against another. To give you some perspective; say for instance you were going to the US on vacation, you would need to buy US Dollars to pay for a hotel, gas and entertainment down there. So, the amount of 1 currency you can buy with another is called an exchange rate. Quite simple right? Or maybe you're asking yourself how you calculate that? Well you would have to look that up since the exchange rates are constantly daily or even hourly. I chose this website since it would be the best point to start at for someone who doesn't know anything about exchange rates.

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If you're planning on traveling abroad any time soon, you'll have likely come across the term " exchange rate." What is it? What do you need to know about it before you plan your trip? And how can it save you money on your vacation?

A foreign exchange rate is the relative value between two currencies. Simply put, "exchange rates are the amount of one currency you can exchange for another."

In travel, the exchange rate is defined by how much money, or the amount of a foreign currency, that you can buy with one US dollar. The exchange rate defines how many pesos, euros, or baht you can get for one US dollar (or what the equivalent of one dollar will buy in another country).

Calculating an exchange rate is simple but can change on a day-to-day basis. As an example: let's say the Euro exchange rate is 0.825835. That means one U.S. Dollar buys, or can be exchanged for, or is "worth" 0.825835 euros.

In order to find out how much two euros is worth in US dollars, divide 1 (as in one dollar) by 0.825835 to calculate how many US dollars one Euro is worth: $1.21. Therefore:

1 USD = 0.825835 Euros

1 Euro = 1.21090 USD

By using the exchange rate, you can see that $1 equals a little over .80 Euros. Two U.S. Dollars equals about 1.65 Euros, while two Euros equals about $2.40 in U.S. money.

The majority of currency exchange rates you will experience are flexible exchange rates. That is, the rate of exchange can rise or decline based on economic factors. These situations can change on a daily basis, often by small fractions during your trip.

Flexible exchange rates between currencies are determined by a foreign exchange market, or "forex" for short. These markets regulate the prices by which investors are purchasing one currency with another, with the hopes of making more money when that nation's money gains strength.

For an example of a flexible exchange rate, look at the shifts between the United States and Canada. In April 2017, one U.S. Dollar was worth $1.28 Canadian Dollars. Between April and August 2017, the value dropped by nearly eight cents, making the Canadian Dollar slightly stronger in exchange. But by the beginning of 2018, the American Dollar regained strength. If you took a vacation to Niagara Falls, Canada in May 2017, your American Dollars would have been worth $1.37 Canadian Dollars, giving you more buying power.

But if you took that same trip in September 2017, your American Dollars would have only been worth $1.21 Canadian Dollars each-a major loss in currency strength.

While most nations price the difference in their currencies on the foreign exchange market, some nations control the exchange rate of their currency against outside monetary units. This is called a fixed exchange rate.

Different governments maintain different rationales for maintaining a fixed exchange rate. In Cuba, where one Cuban Convertible Peso is equal to one American Dollar, the U.S. embargo and political differences caused the Cuban government to treat tourist dollars the same as American dollars. Meanwhile, in China, the government elects to "peg" their currency against the Dollar, leading some to consider the world's most populous nation a "currency manipulator."

Think of it like this: fixed exchange rates seek to maintain a "stable" exchange rate by controlling how much a foreign currency is worth, while flexible exchange rates are based on several economic factors, including the strength of a nation's overall financial health.

Flexible exchange rates can change day to day but are often in very small increments of less than one cent. But major economic factors, like government shifts or business decisions, can have impacts on international exchange rates.

For instance, consider the shifts in the U.S. Dollar between 2002 and 2015. When the national debt of the United States raised significantly between 2002 and 2007, the American Dollar dropped in value compared to their international counterparts. When the economy entered the "Great Recession," the dollar gained some strength back, because major corporations were holding onto their wealth.

International situations can have a major effect on how much the U.S. Dollar is worth abroad. By understanding how these things could change your buying power abroad, you can quickly make decisions on when to exchange your cash for local currency, or hold on to American Dollars and spend using your credit or debit card.

Before you travel, you may receive offers for credit cards or debit cards with "no international transaction fees." Do these have any bearing on foreign exchange rates?

As a service to travelers, banks can elect to process purchases made on debit or credit cards while they are abroad. However, many also choose to tack on an additional fee-sometimes called an "international transaction fee"-to the transaction. This is usually charged as a percentage of the transaction fee and may be separate from the bank fees.

Because these are separate charges, an international transaction fee is not considered part of an exchange rate. To get the best rates while abroad, be sure to always use credit and debit cards that do not charge an international transaction fee.

Before you travel, or while you're traveling, you need to know what the exchange rate is so you'll know how much your money is worth in another country. If a dollar isn't worth a dollar abroad, you can budget accordingly, and now how much you're actually spending while traveling.

Additionally, knowing the exchange rate before you travel can help you get the best deal on currency conversion before you go. It is always important to carry a little foreign currency upon your arrival, so by tracking exchange rates before you travel, you can get the most money from your bank or chosen exchange before you travel.

Don't rely on street kiosks or airport kiosks in another country to give you an accurate or completely fair exchange rate. Currency exchange places on the street or in the airport know that they don't have to do anything to attract travelers, so they slap a huge commission on top of every transaction. As a result, you will exchange a large amount of your money with one of these exchanges, just to get very little in return.

If you know what the rate is, the best places to exchange your money is at a bank or an ATM. Because banks run on standard hours around the world as well, it may not always be convenient to take your cash to a bank. ATMs offer a good backup plan because you can usually get local currency at the current exchange rate. Smart travelers also use a debit card that charges no ATM fees or international transaction fees, so you always get the true value of your cash.

But if you elect to use a credit card abroad, your best bet is to always elect to pay in the local currency. In some situations, payment processing companies may elect to add transaction fees if you decide to pay in American Dollars, which only reduces your buying power. If your credit card has no international transaction fees, paying in the local currency can give you the best exchange rate at the point of purchase without additional hidden fees tacked on.

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What is an Exchange Rate and What Does It Mean?

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If you're planning on traveling abroad any time soon, you'll have likely come across the term " exchange rate." What is it? What do you need to know about it before you plan your trip? And how can it save you money on your vacation?

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The website below depicts the way in which one is able to make comparisons between different currencies and exchange rates. One of importance is the Canadian dollar in comparison with the US Dollar, Euro, as well as Australian Dollar. These comparisons are mainly made with the banks of Canada such as TD Bank, Royal bank of Canada, Bank of Montreal, Scotia bank etc. This websites also includes a short paragraph with regard to Credit card Exchange rates. By using your credit card it allows one to save time and effort yet a disadvantage would mean paying a higher interest rate when purchasing in a foreign country. I have chosen this website to compare exchange rates since it lays out the information in quite an organized manner making it easy to understand and also updates dynamically as the rate changes, I haven't found anything similar on other websites.

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The table below is a comparison of all the major Canadian bank exchange rates. The rates have been sourced from their website or by calling their branch on a given day. Please note, exchange rates change frequently. Some of the banks require you to call them to see thier rates because they change a lot.

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Video # 1 - Exchange Rates and Factors in Canada Specifically

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Video # 1 - Exchange Rates and Factors in Canada Specifically

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In this video we have a journalist/news reader who is interviewing the chief analyst Adam Button for Forexlive regarding commodities such as base metals, precious metals as well as Canadian Oil. Adam Button explains that these commodities are sturdy in the markets but Canada is substandard to invest in due to the rules of the country, yet there has been more investments in the country. One of these investments to name are Natural Gas, where Canada has priced the gas quite reasonably to the US. The economic data received from the bank of Canada has increased the Canadian dollar, this includes inflation and retail numbers as well as GDP. In conclusion of this video it seems as if Canada will do well in the near future. This video was chosen for further information since Adam Button is a chief financial analyst for FOREX live and is knowledgeable in his field. What I found surprising was the fact that Canada was not attractive to investors because of the country's rules.

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Video # 2 - Canadian Dollar Exchange Affected by Various Factors

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Video # 2 - Canadian Dollar Exchange Affected by Various Factors

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In this video we take a look at trade in the Canadian economy where key interest rates remain at a rate of 1.25%, with this the Canadian Dollar is at 77 cents to the US but may fall to 75 cents in the following month. Chief Financial Analyst explains that in order for the bank of Canada (BAC) to raise the interest rates many current issues would need to be dealt with. For example, the NAFTA agreement would need to be resolved and the housing worries would need to be lifted. It is due to this reason that the Canadian Dollar would need to fall since it is highly unlikely that the aforementioned events will take place. I decided to include this video on my wall since I wanted to actually display the effects a political situation can have on exchange rates and the matters discussed in this video are of relevance to Canadians because Canada also belongs to NAFTA. I found that a lot of factors actually go into the decision behind raising the interest rate.

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Video #3 - When to Exchange Currency when Travelling Abroad

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Video #3 - When to Exchange Currency when Travelling Abroad

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To further drive home the point of the importance of exchange rates this video tackles the issue of when one should be exchanging their home currency for their vacation destination currency. The guy in this video goes on to explain that you should not always exchange money at your local bank at home before you leave since you might not always get the best rate. Rather, he states that one should go to their destination and exchange money there using their home bank card since Visa and MasterCard are essentially worldwide. However, he also advises you to take emergency money with you for whatever situations could arise. The contents of this video are useful to anyone who travels abroad, hence my reason for including it.

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When to Exchange Money for Your Trip Abroad

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In this video we take a look at how we can exchange our currencies in a much cheaper, easier, faster and efficient way with Olympia FX currency ATM. One would not have visit the local bank, airport as well as currency exchange banks. With this one is able to simply go to any of the Olympia FX ATM’s and obtain their desired currency in which these ATM’s are already equipped with currencies such as the US Dollar, Euro, British pound as well as the Mexican Pesos. This efficient ATM can be found when one downloads the Olympia App and locates where exactly the ATM’s are located. I included this since I found it really interesting that ATM's like these actually existed, this makes it converting cash seamless and efficient.

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For Canadians who are planning a trip to the U.S. this summer, or even the snowbirds who will be heading back for the winter, it is a great time to stock up and buy U.S. dollars. With the predictability of exchange rates being so uncertain, taking advantage of Canadian dollar highs can save you substantially in the long run.

It was only back in January of this year when the Canadian dollar hit over 10 year lows at 1.45. Since then the Loonie has gained almost 30 percent pushing back as high as the mid 1.20's. For Canadians, these are the best exchange rates we have seen since last summer. With so many factors driving exchange rates these days, its best to buy U.S. dollars when they are in your favor as tomorrow is never promised.

The Canadian dollar is highly correlated with oil prices which have been one of the most unpredictable commodities over the past year. When oil tanked back in January, so did the Loonie. Oil is high now, supporting a stronger Canadian dollar but there has been little change in the supply/demand issues that has brought on such low oil prices so there is no guarantee that we will not see another drop. On top of this there is a looming interest rate hike on the horizon for the Federal Reserve. Although the date is uncertain, when this happens we will likely see the U.S. dollar gain against all major currencies, the Canadian dollar included.

For Canadians who are planning to travel to the U.S. any time soon, now may be a good time to stock up on U.S. Without knowing where exchange rates are going, even purchasing half of what you need could lock you in at the best exchange rates we will see. At the very least you can protect yourself against future loss. Of course the dollar could go either way depending on what happens in the markets, but the general rule of thumb is that when the dollar is in your favor, it's a good time to buy.

For Canadians located in Western Canada, you may be able to get your U.S. dollars at one of our FX ATMs. These machines provide the best exchange rates in the market for your travel cash with the convenience of an ATM. The exchange rates in our machines are live to the market so you can take advantage when the exchange rate moves in your favor. Currently there are FX ATMs located in Vancouver, Calgary, and Lethbridge, with many locations on the way. Visit www.OlympiaFXatm.com for a location near you.

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Great Exchange Rates On US Dollars for Canadian Travelers * Olympia Trust Foreign Exchange

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For Canadians who are planning a trip to the U.S. this summer, or even the snowbirds who will be heading back for the winter, it is a great time to stock up and buy U.S. dollars. With the predictability of exchange rates being so uncertain, taking advantage of Canadian dollar highs can save you substantially in the long run.

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The below image illustrates the exchange rates between a few currencies namely the US Dollar, GBP, Euro, NZD as well as the JPY. We can clearly see the different exchange rates for example the US Dollar is at 0.8142 and the Euro at 0.6527 which makes the US Dollar higher than the Euro.

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In the image below it is shown to us a few countries in conjunction with their currencies other namely Europe, USA, South Africa, Hong Kong, Japan, Australia, Canada as well as Switzerland. They have also illustrated some of the monies among each other such as a dollar notes as well as some euro notes.