Exchange Rate Dynamics

Exchange rate dynamics refer to how the value of one country's currency changes relative to another's. Factors affecting these rates include interest rates, economic stability, inflation, and political events. When a country's economy is strong, its currency usually appreciates, meaning it buys more foreign currency. Conversely, if the economy weakens or political instability arises, the currency may depreciate. Additionally, market speculation and international trade flows also play significant roles in determining exchange rates. Understanding these dynamics helps in grasping how different currencies interact in the global economy.