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What factors affect the exchange rate. Exchange rate. Factors affecting the exchange rate. Types of exchange rates

Many traders and analysts trading on the Forex exchange are tormented by the question: Which of the exchange factors affect the entire exchange rate?! In this article, we will try to delve into this topic as much as possible and analyze it in detail.

So, what all the same factors have a direct influence on?

The exchange rate is an integral part of the monetary system and serves several purposes:

For comparison pricing policy domestic and foreign markets. In addition, this also includes a comparison of the cost indicators of different states with each other, which can be displayed in different currencies.

As a factor in the temporary recalculation of various accounts in foreign currency, both banks and firms.

And finally, for financial exchange when buying / selling all kinds of goods and services, when transferring capital and loans.

Due to the fact that foreign currency cannot act as a legal payment or purchasing instrument, the exporter is forced to exchange it for the national one. The importer, on the other hand, converts the national unit into a foreign one in order to pay for goods or services purchased abroad. And debtors, for example, acquire foreign currency to liquidate various kinds of debts and interest on external loans.

Given all of the above, it is easy to guess that the exchange rate is presented as a kind of "price" of the monetary unit of a particular state, expressed in the monetary units of the state of interest or in international units(currently the euro).

This rate directly depends on the purchasing power of currencies. These opportunities are grouped into the "economic category" of the exchange rate, which plays extremely important role in commodity production.

Thanks to this, the national product can receive public recognition on the basis of an international value measure. And this, in turn, ensures the absolute interchangeability of services and goods within the international economy.

The exchange rate can be:

  • floating - this is a rate that changes freely under the influence of supply and demand. It is on this type of course that the state can exert a certain influence.
  • fixed - this is the exchange rate, with a clearly regulated ratio between the currencies of the world and the possibility of fluctuations of no more than 2.25 percent.

Separately allocate a floating rate. This subspecies is quite similar to the floating rate and is subject to free constant change. Its performance is influenced by the magnitude of supply and demand. This course is regulated exclusively by market mechanisms of governance.

What does the exchange rate depend on?

Factors and events affecting the overall exchange rate

Like any price, the exchange rate is characterized by the dynamics of the cost basis. A similar effect is exerted by the supply and demand of the monetary unit. Several factors influence the balance between these factors.

These factors can be either:

  • opportunistic,
  • as well as long term.

market factors, have a direct impact on the exchange rate through changes in business activity, military and political tensions in states, through forecasts and conjectures. Sometimes even political rumors matter. The influence of any of these circumstances on the exchange rate is very abstract and cannot be accurately calculated and predicted.

Therefore, the second group was singled out, which includes factors that also affect the exchange rate in the presence of long-term trends. These factors help locate national currency in a kind of hierarchy of currencies.

TOP 9 main long-term factors affecting the exchange rate

TOP 1. Inflation and its rates. The relationship between a currency and its buyers is called purchasing power parity. It is he who represents a certain basis of the exchange rate. Therefore, the impact of inflationary rates on the entire exchange rate is undeniable. The higher the inflation rate in the state, the lower and weaker the exchange rate of the entire national currency.

As a rule, such an influence can be traced only over a long time period. The alignment of purchasing power parity and the exchange rate takes place within two years.

TOP 2. The second factor is growth in national income. The impact of national income on the exchange rate is due to an increase in demand for foreign products. At the same time, the import of goods can have a significant impact on the outflow of foreign currency from the state.

TOP 3. Among other things, the exchange rate depends on the influence of the balance of payments. His condition is the third link in the chain that includes exchange rate factors. There is a direct relationship here: the higher the balance of payments, the higher . At the same time, the influence on the national currency from external public debtors increases.

The reason for this is the competitive relationship between the currency exchange market and the securities market.

The fourth factor influencing the general exchange rate will be differences in interest rates of various countries of the world.

TOP 4. In this case, there are two main circumstances:

the dynamics of interest rates affects primarily the international movement of capital (ceteris paribus).

First of all it concerns short-term assets. At the same time, the increase in the interest rate affects the inflow of foreign capital. With its decrease, there is an outflow of foreign capital abroad, including national ones.

changes in interest rates will lead to a modification of the exchange rate by changing the main operations in the foreign exchange market and the loan capital market.

TOP 5. The fifth factor of influence are speculative actions on . If the exchange rate N is characterized by a downward trend, then the owners of the currency (banks, organizations, etc.) try to “get rid” of it in advance. Often this takes the form of a resale to another, more fixed and reliable currency.

At the same time, the position of the currency is undoubtedly weakening. The exchange rate of any state quickly reacts to the influence of the economic and political situation in the country and to fluctuations in relations between different rates.

These factors pave the way for speculative activity and facilitate the movement of "hot" cash.

TOP 6. Exchange rate is directly dependent on the degree of use of a particular currency in the international market. An example of this is the fact that almost 70% of foreign exchange transactions in the Eurozone occur with the participation of the dollar, due to the high demand for this particular currency. It is also impossible to reduce the influence of international settlements on the exchange rate.

TOP 7. special factor influence is the credibility of the national currency on an international scale. The degree of trust directly depends on the nature of the economic situation and the political climate within the state. The factors discussed above also affect this indicator.

It should be borne in mind that the dealer pays attention not only to speed economic development, parity, the balance of supply and demand, but also on the possible prospects for their immediate dynamics.

TOP 8. Eighth influence factor connected with the previous ones and is called "monetary policy". market and government controlled unconditionally influence the direct course of any state. This happens with the help of the currency supply and demand mechanism and is accompanied by a change in the dynamics of exchange rate relationships.

At the same time, a real exchange rate is formed on the market, which acts as an indicator of the economic situation, the circulation of monetary volumes, and so on. Public policy can affect the exchange rate with its increase or decrease. Everything depends on the objectives of economic and monetary policy.

TOP 9. The last, ninth factor of influence, implies the level of development of the stock market in the country. This market has a direct impact on the exchange rate, as the main competitor. Like the foreign exchange market, the stock market can attract foreign capital or truncate funds that could be successfully used on the exchange for the purpose of buying foreign currency.

About exchange rates. How to deal with your savings?

Like any price, the exchange rate deviates from the cost basis - purchasing power of currencies ( the volume of commodity mass purchased per monetary unit) - under the influence of supply and demand of currency. The ratio of such supply and demand depends on a number of factors. The multifactor nature of the exchange rate reflects its relationship with other economic categories- cost, price, money, interest, balance of payments, etc. Moreover, there is a complex interweaving of them and the promotion of one or the other factors as decisive, depending on the general economic and political situation in the country and the world. Among them are the following:

1. The rate of inflation. The ratio of currencies according to their purchasing power (purchasing power parity), reflecting the operation of the law of value, serves as a kind of axis of the exchange rate. Therefore, the rate of inflation affects the exchange rate. The higher the rate of inflation in a country, the lower the rate of its currency, unless other factors counteract. Inflationary depreciation of money in a country causes a decrease in purchasing power and a tendency for their exchange rate to fall against the currencies of countries where the inflation rate is lower. This trend is usually observed in the medium and long term. The equalization of the exchange rate, bringing it into line with purchasing power parity, takes place on average within two years. This is due to the fact that the daily quotation of the exchange rate is not adjusted according to their purchasing power, and other exchange rate factors also operate.

However, the exchange rates of currencies, cleared of speculative and market factors, change in accordance with the law of value, with a change in the purchasing power of monetary units.

The dependence of the exchange rate on the rate of inflation is especially high in countries with large volumes of international trade goods, services and capital. This is explained by the fact that the closest relationship between the dynamics of the exchange rate and the relative rate of inflation is manifested when the exchange rate is calculated on the basis of export prices. World market prices represent the monetary expression of international value. As for import prices, they are less suitable for calculating the relative purchasing power parity of currencies, since they themselves largely depend on the dynamics of the exchange rate. The wholesale price index is acceptable for such a calculation only for developed countries, where the structure of wholesale domestic trade and exports is somewhat similar. In other countries, this index does not include many exported goods. Such a calculation based on retail prices can give a distorted picture, as it includes a number of services that are not traded globally. Ultimately, in the world market there is a spontaneous alignment of the rates of national monetary units in accordance with real purchasing power.

Real exchange rate is defined as the nominal exchange rate (for example, the ruble against the dollar) multiplied by the ratio of price levels in Russia and the United States.

  • 2. State of the balance of payments. An active balance of payments contributes to the appreciation of the national currency if the demand for it from foreign debtors increases. A passive balance of payments generates a downward trend in the exchange rate of the national currency, as debtors sell it for foreign currency to pay off their external obligations. The instability of the balance of payments leads to an abrupt change in supply and demand for the respective currencies. AT modern conditions the influence of international capital movements on the balance of payments and, consequently, on the exchange rate has sharply increased.
  • 3. Difference in interest rates in different countries. The influence of this factor on the exchange rate is explained by two main circumstances. First, a change in interest rates in a country affects, other things being equal, the international movement of capital, primarily short-term capital. In principle, an increase in the interest rate stimulates the inflow of foreign capital, and its decrease encourages the outflow of capital, including national capital, abroad. The movement of capital, especially speculative "hot" money, increases the instability of the balance of payments. Secondly, interest rates affect the operations of foreign exchange, credit, stock markets. When conducting operations, banks take into account the difference in interest rates in the national and world capital markets in order to make profits. They prefer to get cheaper loans in the foreign capital market, where interest rates are lower, and to place foreign currency in the national credit market, if interest rates are higher there.
  • 4. The activities of the foreign exchange markets and speculative foreign exchange transactions. If the exchange rate of a currency tends to fall, then firms and banks sell it in advance to more stable currencies, which worsens the position of a weakened currency. Currency markets quickly respond to changes in the economy and politics, to fluctuations in exchange rates. Thus, they expand the possibilities of currency speculation and the spontaneous movement of "hot" money.
  • 5. The degree of use of a certain currency in the European market and in international settlements. For example, the fact that 60% of the operations of European banks and 50% of international settlements are carried out in dollars determines the scale of supply and demand for this currency. Therefore, the periodic growth of world prices and payments on external debts contributes to the appreciation of the dollar even in the face of a decline in its purchasing power.
  • 6. The exchange rate ratio of currencies is also affected by the acceleration or delay in international payments. In anticipation of a depreciation of the national currency, importers seek to speed up payments to counterparties in foreign currency so as not to incur losses when its exchange rate increases, and exporters delay the repatriation of foreign exchange earnings. When the national currency strengthens, on the contrary, the desire of importers to delay payments in foreign currency prevails, and exporters - to accelerate the transfer of foreign exchange earnings to their country. This tactic, called "leads and lags," affects the balance of payments and the exchange rate.
  • 7. The degree of confidence in the currency in the national and world markets. It is determined by the state of the economy and the political situation in the country, as well as the factors discussed above that affect the exchange rate. Moreover, dealers take into account not only the rate of economic growth, inflation, the level of purchasing power of the currency, the ratio of demand and supply of currency, but also the prospects for their dynamics. Sometimes even waiting for the publication of official data on trade and payments balances or election results affects the exchange rate. Sometimes there is a change of priorities in the foreign exchange market in favor of political news, rumors about the resignation of ministers, etc.
  • 8. Currency policy. The ratio of market and state regulation of the exchange rate affects its dynamics. The formation of the exchange rate in the foreign exchange markets through the mechanism of supply and demand of currency is usually accompanied by sharp fluctuations in exchange rates. The market develops a real exchange rate - an indicator of the state of the economy, confidence in a particular currency. State regulation of the exchange rate is aimed at its increase or decrease, based on the objectives of the monetary and economic policy. For this purpose, a certain monetary policy is being pursued.

Thus, the formation of the exchange rate is a complex multifactorial process, due to the relationship between the national and world economies and politics. Therefore, when forecasting the exchange rate, exchange rate factors and their ambiguous influence on the ratio of currencies, depending on the situation, are taken into account.

International relations are based on the use of national currencies. These include various means of circulation: coins, banknotes, payment documents, securities, precious metals, etc. Depending on the level of integration of the country into world economy, the currency can turn around in different ways. National unit exchange - required condition international trade.

Definition

The exchange rate is the value of the country's currency, expressed in payment signs of another state. It links economics to outside world, allows for international transactions.

The ability of citizens of the country and non-residents to freely buy and sell banknotes is called convertibility. Any restrictions on such operations by the Central Bank or the state turn the currency into a partially negotiable one. Free conversion is possible only in an economically stable country. Legislative permission alone is not enough, it is also necessary to have confidence in the monetary unit and a high assessment of the level of development of the state.

The conversion is based on currency parity. But in practice, the rates of monetary units never coincide with it, since supply and demand are not equal. In conditions of an active balance of payments, the foreign exchange rate in the domestic market is falling, while the national one is growing. The reverse situation occurs with a passive balance. Therefore, in most countries at the same time there is an official and free exchange rate. According to the first one, the Central Bank settles with international organizations, and according to the second - between individuals.

Quotation - fixing the national currency in a foreign one. They are of two types: direct (for example, the price of a dollar in the domestic market) and reverse. If the value of one currency is expressed in terms of two others, then this is a cross rate. The need for it arises if the exchange of direct quotes between two monetary units is very small.

The demand for a currency is determined by the interest of other countries in domestic goods. To pay for a purchase, foreign states should carry out a currency exchange.

The offer is determined by:

1) the demand of a given country for foreign goods;

2) interests in financial assets of other states.

How is the value of a currency unit calculated?

The price changes every day under the influence of various macroeconomic factors. The Central Bank of the Russian Federation publishes rates daily in special bulletins. The basis for these calculations are:

1. Quotes of the last exchange business day for transactions "US dollar - Russian ruble".

2. The official exchange rate set by the IMF on the previous business day.

3. Prices for other currencies are calculated by the Bank of Russia on the basis of their quotations against the dollar in the international, exchange segments of the domestic market, as well as the levels established by the Central Bank of the respective states.

Factors affecting the exchange rate

In the days of the gold standard, purchasing power parity was determined by the content of the precious metal in monetary units, and the price fluctuated within 1%, i.e., the cost of transporting coins. In the conditions of paper circulation, it changes daily, so it became necessary to study the laws of its fluctuation. The price is formed under the influence of supply and demand.

A change in the exchange rate affects the state of foreign trade, is reflected in the result of the activities of organizations, the level of employment, etc. Therefore, state intervention in such relations is necessary. But its intensity depends on the goals and the set of economic levers. Actions can be aimed both at reducing (devaluation) the value of the national currency, and at its increase (revaluation).

The exchange rate may change under the influence of the country's balance of payments - the ratio of received and paid amounts. A surplus indicates an increase in demand for a currency from foreign borrowers, thus strengthening it. Passive is an increase in interest in foreign currency, a depreciation of the national one.

Changing consumer tastes. An increase in demand for imported services will lead to a decrease in the price of the national currency. And increasing interest in domestic services will contribute to the growth of its cost.

State policy in foreign trade. The exchange rate will increase if imports are restricted by the state. But the widespread use of such measures may Negative consequences, as the volume of international trade will be greatly reduced.

Change in the amount of income of buyers. With the growth of the amount of temporarily free funds, the consumption of goods (imported and domestic), the demand for foreign currency increases. In the market, this will be reflected in a depreciation.

Inflation. Other things being equal, this process is inversely proportional to the exchange rate. If prices in one country rise faster than in another, then imported goods will cost less than domestic ones. Accordingly, the value of the national currency will decrease. The desire of people to save real incomes by buying foreign currency will only aggravate the situation. But, since the supply of the currency remains unchanged, inflation will lead to a depreciation. Therefore, it is customary to calculate purchasing power parity (PPP). This is the real price of the ruble, expressed in the monetary unit of another state. The calculation is carried out for similar products. Example: the consumer basket in Russia is 7000 rubles, and in the USA - 100 dollars. The ratio of rates will look like: 1 dollar = 70 rubles, or 1 ruble. = $0.01.

The value of real interest rates: the higher they are, the more attractive this country is for investment. But, on the other hand, their growth causes an increase in the cost of credit. If entrepreneurs lack own funds for financing economic activity, then the resulting borrowed capital with high rates will lead to an increase in production costs, an increase in product prices and a decrease in the attractiveness of the national currency. That is, this factor can have a dual effect on the dollar exchange rate.

State regulation of the economy: the use of foreign exchange reserves, trade, financial and monetary policy.

Other factors affecting the exchange rate:

1. Publication of important economic data in the media: inflation rates, balance of payments deficit, unemployment rate, discount rates, stock indices, stock prices, bonds, GNP, election race, etc.

2. Large transactions of commercial financial organizations.

3. Exchange rate factors, the impact of which cannot be predicted ( we are talking about wars, revolutions and other cataclysms).

4. The Central Bank can have a direct impact on the exchange rate by buying or lending currency in large quantities. This causes sharp fluctuations in the ratio. Regulation of interest rates and the volume of money supply does not have such a strong effect on the value of the ruble.

5. Insurance, hedge, pension and other funds invest in currencies in an attempt to avoid devaluation risks. Such transactions - especially with large amounts - significantly affect the country's exchange rate.

6. The cost of gold and oil.

Exchange rate regulation

Foreign exchange interventions - operations of the Central Bank for the purchase and sale of the country's monetary unit. To increase the exchange rate, the central bank must sell foreign currencies, thus reducing the demand for them. And to lower - perform the opposite operation.

Discount policy is a change in the discount rate that affects the price of a loan in the domestic market. With a passive balance of payments, its growth can serve as an incentive for capital inflows. By reducing the rate, the Central Bank is counting on an outflow of funds that will reduce the surplus and lower the exchange rate.

Protectionist measures

These include:

A blockade is a sanction in the form of unilateral restrictions by one state or a group of countries of another power that will not allow the use of its banknotes;

Prohibition on the free circulation of foreign currency;

Regulation of international transactions;

The movement of capital, gold, the Central Bank;

Repatriation of profits;

The concentration of foreign currency in the hands of the state.

Types of exchange rates

There are several classifications. By time:

1) spot - the exchange rate, which is held for no more than 2 business days after the quote is accepted;

2) forward - the future value of the national currency, expressed in foreign.

Types of exchange rates that are used to identify real movement trends:

1) nominal - current quotation;

2) real - this is the recalculated cost of the monetary unit, taking into account inflation;

3) nominal effective - the ratio of the national currency and the currencies of the partner countries;

4) real effective exchange rate - nominal, calculated adjusted for price dynamics.

According to the degree of hardness:

1) fixed - a clear price ratio;

2) limited flexibility - can vary within certain limits;

3) floating - established on the basis of supply and demand.

There are also hybrid types: controlled floating, creeping fixation and a currency corridor - these are the limits for price fluctuations that are set by the Central Bank. His main feature lies in the fact that the limit ratios are strictly limited and fixed by law. The currency corridor is introduced in the absence of free capital, due to a large deficit, internal and external debt.

Exchange rate regimes

"Currency" in translation means "value". Let's take an example. Even 100 years ago, the value of money was determined by the amount of gold reserves that the state had. But after World War II most of precious metal turned out to be concentrated in the US. Then there was a transition to the gold exchange (Bratton Woods) system, according to which:

  • the reserve currency is the US dollar;
  • the treasury, if necessary, will exchange it for gold (35:1);
  • all national currencies in a certain ratio were "pegged" to the dollar, and through it - to the most expensive metal.

Then the monetary unit of the richest country in the world (USA) replaced gold in international settlements. But after the rate of production growth in Japan overtook the American one, the European Economic Community was formed (1954), which included France, Germany, Italy, Belgium, the Netherlands and Luxembourg. The competitiveness of goods from the United States has declined sharply. Countries in which dollars were in large quantities began to present them to the treasury in order to exchange them for gold. And after the stocks of the precious metal ran out, the US devalued the currency. On March 19, 1973, a new system was introduced.

The fixed exchange rate is set and maintained by the intervention of the Central Bank on certain level. Consider this on the example of the ratio of pounds sterling to the dollar. If the demand for the British currency grows, then its rate rises. The task of the Central Bank is to clearly fix it at a certain level. To do this, the bank must buy foreign currency. As a result of increased demand for imported goods, the dollar value of the pound is declining. The Central Bank should reduce the availability of the national currency by exchanging dollars for it.

As the exchange rate rises, foreign exchange reserves decrease. Demand for goods leads to an increase in exports, that is, an influx of foreign currency. This causes a surplus in the balance of payments. In such a situation, the Central Bank should increase the supply of the national currency by buying foreign. This will lead to the replenishment of the country's monetary reserves.

Due to the growth of imports, the exchange rate decreases, there is an outflow of capital from the country, the balance becomes negative, and there is a deficit. In order to finance it, it is necessary to reduce the supply of the national currency by buying it.

At a fixed exchange rate, the balance of payments looks like:

Current operations (Xn) + Capital flow (CF) = Change in reserves (R).

A fixed exchange rate, which is accompanied by a chronic surplus or deficit in the balance of payments, can cause a lot of problems. In the first case, there is a possibility of excessive accumulation of reserves, which can lead to inflation. In the second - there is a threat of depletion of foreign exchange reserves. In any of these situations, the Central Bank will be forced to officially change the price of the monetary unit, that is, to cause a revaluation or devaluation.

Floating exchange rates are regulated by the market mechanism: supply and demand in the market, without government intervention. The balance of payments looks like:

In such a situation, the deficit, that is, low demand for domestic goods, is financed by an inflow of funds. A depreciation is called a depreciation. This makes domestic goods cheaper and promotes the development of exports. The surplus is financed by the outflow of funds. If domestic goods are in great demand, the interest of foreign investors grows along with the exchange rate of the national currency. This situation is called a rise in price. Foreigners buy banknotes of this country. This reduces exports, stimulating imports and depressing the national exchange rate.

The current system cannot be called completely flexible. The US Federal Reserve and European Central Banks do not allow the dollar to fluctuate freely in order to prevent a sharp fall (as in 1985). Therefore, they buy it, artificially increasing demand and maintaining a higher rate.

The situation in the domestic market

In the Russian Federation, the currency corridor first appeared on June 8, 1995. Since 1996, a sliding peg of the ruble to the dollar has appeared. Such a system is called a sloping currency corridor. The price change depended on the forecast inflation rates with small deviations. Since 2008, a dual-currency corridor began to operate, which was adhered to by the reserves of the Central Bank.

The value of the ruble in the national currencies of other countries largely depends on the volume of exports.

Correlation of the Russian currency exchange rate with USD and EUR

In 2008-2009 against the backdrop of a decrease in exports, the ruble strengthened, although the correlation dependence is quite high. This indicates the weakness of world reserve currencies. The figure -0.78 shows that the appreciation of the national currency is taking place against the backdrop of a decrease in the volume of deliveries of goods to other countries. In the period 2010-2011. the exchange rate of the ruble fell against the backdrop of the country's recovery from the crisis and the growth of exports. In 2012-2013, the national currency strengthened against the dollar and the euro, a direct dependence appeared.

In April 2014, the ruble hit a historical high against the dollar (1:50) and then dropped sharply (to 36). While fluctuations are commonplace in floating-price countries, the changes that took place last year were difficult to predict.

Floating ruble

CB long time did not dare to raise the key rate, on the basis of which the banking system is being refinanced. In recent months, the Bank of Russia has “sponsored” CBs in the amount of 5 trillion rubles. The main source of such investments is loans secured by the Central Bank and non-market assets. With the weakening of the ruble, the free cash resources of the CB were directed to the foreign exchange market. Today it is more profitable to carry out speculative operations than to invest in the economy. To avoid such situations, European Central Banks have raised discount rates since last year. The Bank of Russia, on the one hand, limited the inflow of capital to 5.5%, and on the other hand, restrained the devaluation of the ruble due to gold and foreign exchange reserve. And only in March 2014 raised the discount rate to 7%. This decision was caused by the need to raise the metallurgy and mining industry. They have become practically unprofitable. The only way to remedy the situation is to weaken the ruble against the dollar.

Summary

The exchange rate reflects the value of the national currency through a foreign one. It should be regulated by the state and the Central Bank. If a clear ratio is established, then this is a fixed rate. If the price fluctuates depending on supply and demand - floating. These exchange rate regimes maintain a certain price ratio.

In this article, I want to tell what does the exchange rate depend on, and consider the main factors affecting the exchange rate. As you know, the exchange rate is one of the most important countries, and has a very importance for efficient. Therefore, any person who wants to put in order and secure personal finances should understand well what the exchange rate depends on,

To quickly predict its changes and apply them in practice in order to increase their own financial well-being.

Factors affecting the exchange rate.

1. State trade balance. That is, the ratio of export and import operations. When exporting goods and services, foreign exchange earnings enter the country, and when importing, on the contrary, foreign currency leaves the country. Therefore, if the trade balance is negative, it is biased towards imports (the country imports more than it exports), this always puts pressure on the national currency, its exchange rate decreases, since the country has a foreign currency deficit. And, conversely, when the trade balance is positive, biased towards exports (the country exports more than it imports), the national currency always appreciates, since the country has an abundance of foreign currency.

However, a positive trade balance is not always good, especially if its balance (the difference between exports and imports) is very large. An overvalued country's currency is just as bad as an undervalued one, and maybe even worse. Indeed, in this case, the cost of its goods grows, and they become uncompetitive in foreign markets. In such a situation, the Central Bank of the country takes actions aimed not at strengthening, but at reducing the exchange rate of the national currency. For example, 2-3 years ago it happened in Japan.

The trade balance is one of key factors affecting the exchange rate. Ideally, a country's trade balance should be close to zero (that is, exports should be approximately equal to imports) - in this case, the exchange rate will be the most stable.

2. Macroeconomic indicators of the country. Such as inflation rate, unemployment rate, gross domestic product, etc. Each country calculates its most important indicators, but the main ones are always similar. All these data characterize their directions of development of the state economy and have an impact on the exchange rate. For example, high inflation and unemployment always Negative influence on the exchange rate of the national currency, and the growth of production, on the contrary, supports and strengthens the national currency.

3. Policy of the Central Bank of the country. This factor is also one of the fundamental ones. Here we should consider several directions of actions carried out by the Central Banks of the states that provide strong influence to the exchange rate.

– Issue of money. In most cases, additional emission stimulates the depreciation of the national currency, because its money supply is growing, which means that the value of money is falling. But not always: so, let's say, the US Federal Reserve System practically "non-stop" prints new dollars, and they still continue to be the strongest world currency, since other monetary regulation instruments are correctly used there to curb dollar inflation.

– foreign exchange interventions. When the Central Bank needs to strengthen or weaken the national currency, it conducts, that is, it sells or buys large lots of foreign currency at a low or high rate on the interbank foreign exchange market of the country, thereby reducing or increasing its value. All this happens at the expense of the state's foreign exchange reserves, so the larger the country's foreign exchange reserves, the more opportunities the Central Bank has to regulate the exchange rate.

Foreign exchange interventions, as a rule, have a temporary effect. For a permanent strengthening or weakening of the exchange rate will require the influence of other factors.

– Discount rate. Another regulator of the Central Bank - or the refinancing rate - is the percentage at which the Central Bank can issue loans to commercial banks. The lower it is, the more available credit resources, the more loans are issued to the economy, the more goods and services are produced, and, therefore, the more stable the exchange rate of the national currency. Practice shows that countries with the lowest interest rates have the strongest currencies in the world.

– Operations with debt obligations. If the Central Bank wants to increase the exchange rate of the national currency, it issues and sells to legal and individuals their debt obligations (so-called bonds of the state internal loan or treasury bonds) - securities that provide a fixed income and the opportunity to earn on the growth of their value. Thus, he withdraws the money supply of the national currency, it becomes smaller, which means that its value increases. The yield of such bonds is directly dependent on how much money the Central Bank plans to raise, and their reliability is guaranteed by the state.

When it is necessary to reduce the exchange rate of the national currency, the Central Bank, on the contrary, begins to buy up its obligations, increasing their value, thereby increasing the money supply.

Many central bank policy instruments can affect the exchange rate even if they are not actually applied, but are the so-called. "verbal", that is, voiced only in words. For example, the Central Bank declares that it plans to conduct a major foreign exchange intervention, traders in the markets, in anticipation of the strengthening of the national currency, begin to buy it, and the rate rises naturally, even without the actual implementation of this intervention.

4. Large investment projects and foreign trade contracts. Speaking about what the exchange rate depends on, it should be noted, so to speak, the future plans of the state, which are directly or indirectly related to the inflow or outflow of foreign currency. The implementation of such projects may have an impact on the trade balance, and this is the main factor affecting the exchange rate.

Implementation of major investment projects can plan both an outflow and an inflow of currency, large export contracts involve an inflow of foreign exchange earnings, and import contracts - its outflow. If this is planned (for example, contracts have already been approved and signed), further actions may affect the exchange rate.

5. Public confidence in the national currency. The extent to which the population trusts the currency of their country greatly affects the exchange rate. If people prefer, it means that there is always an increased demand for it, which will have a negative impact on the national currency. And this demand, if it exists, is very difficult to stop. Even if the Central Bank begins to apply its regulators, for example, limits the sale of foreign currency, imposes additional fees on these transactions, prohibits foreign currency deposits, etc., this often leads to the opposite effect: the black market of foreign currency begins to work, where it is sold even more expensive , panic begins among people, currency hype, which leads to sharp jumps in the exchange rate.

During a period of panic, a situation always arises when (even with large commissions) in order to maintain a currency position, which further spins the black market and inflates the exchange rate to unimaginable limits. Surely all of you periodically observe a similar situation.

By creating a rush demand for the currency, people themselves provoke its growth. The preferences of the population and panic moods are very important factors affecting the exchange rate. In some situations, they are even the only ones! (that is, there are no other serious prerequisites for the growth of the foreign exchange rate, but it is growing solely because of panic). As a result, this always leads to the same rapid fall in the exchange rate, and all those who bought the currency at the peak of the panic are at a loss. Therefore, always think carefully, and do not panic in the absence of other factors affecting the exchange rate!

6. currency speculation. It often happens that large participants in the interbank (or even global) foreign exchange market deliberately “swing” the exchange rate in order to obtain speculative earnings. Seeing such a case, the Central Bank may intervene in the process, imposing certain sanctions on these participants, but still such a situation is far from uncommon, and everyone who is involved has probably seen it more than once.

The so-called "currency swing" can have a very serious impact on the exchange rate, but it will be short-lived, so this situation can be used to earn money, but in no case to transfer your savings from one currency to another.

7. Force majeure circumstances. And, finally, speaking about the factors influencing the exchange rate, one cannot fail to mention force majeure circumstances. For example, military actions, serious protest movements, mass strikes, terrorist attacks, etc. also always have a serious impact on the exchange rate of the country in which it occurs. This impact can be both short-term, if the circumstance is quickly eliminated, and lingering, if it continues. long time, or led to irreversible consequences in the economy and the financial sector, requiring a long recovery.

For example, everyone probably remembers that when a major terrorist attack took place in the United States on September 11, 2001, the dollar exchange rate fell sharply around the world. However, this fall was short-lived.

I have only briefly listed the main factors affecting the exchange rate. Of course, you can consider each of them in more detail, but this information will already be enough to navigate the currency pricing and learn to correctly predict changes in the exchange rate, which will allow you to avoid mistakes and will find its positive reflection on the state of your personal finances.

That's all. The site strives to ensure that your financial literacy always meets the requirements of current realities. Stay with us and stay tuned for updates. See you soon!

The exchange rate is the value of the country's currency, expressed in payment terms of another state. It connects the economy with the outside world, allows for international transactions. The ability of citizens of the country and non-residents to freely buy and sell banknotes is called convertibility.

Factors affecting the exchange rate .

Like any price, the exchange rate deviates from the cost basis - the purchasing power of currencies - influenced by the supply and demand of the currency. The ratio of such supply and demand depends on a number of factors. Among them are the following.

1. The rate of inflation. The ratio of currencies in terms of their purchasing power, reflecting the operation of the law of value, serves as a kind of axis of the exchange rate. Therefore, the rate of inflation affects the exchange rate. The higher the rate of inflation in a country, the lower the rate of its currency, unless other factors counteract. Inflationary depreciation of money in a country causes a decrease in purchasing power and a tendency for their exchange rate to fall against the currencies of countries where the inflation rate is lower. This trend is usually observed in the medium and long term.

2. State of the balance of payments. An active balance of payments contributes to the appreciation of the national currency, as the demand for it from foreign debtors increases. A passive balance of payments generates a downward trend in the exchange rate of the national currency, as debtors sell it for foreign currency to pay off their external obligations. The instability of the balance of payments leads to an abrupt change in the demand for the respective currencies and their supply. In modern conditions, the influence of the international movement of capital on the balance of payments and, consequently, on the exchange rate has increased.

3. Difference in interest rates in different countries. The influence of this factor on the exchange rate is explained by two main circumstances. First, a change in interest rates in a country affects, other things being equal, the international movement of capital, primarily short-term capital. In principle, an increase in the interest rate stimulates the inflow of foreign capital, while its decrease encourages the outflow of capital, including national capital, abroad.



4. The activities of the foreign exchange markets and speculative foreign exchange transactions. If the exchange rate of a currency tends to fall, then firms and banks sell it in advance to more stable currencies, which worsens the position of a weakened currency. Currency markets quickly respond to changes in the economy and politics, to fluctuations in exchange rates. Thus, they expand the possibilities of currency speculation and the spontaneous movement of "hot" money.

5. The degree of use of a certain currency in the European market and in international settlements. For example, the fact that 60% of Eurobank transactions are carried out in dollars determines the scale of supply and demand for this currency. The degree of its use in international settlements also affects the exchange rate. Thus, in the 1990s, the dollar accounted for 50% of international settlements, 70% of foreign debt, in particular developing countries. Therefore, the periodic increase in world prices, the growing payments on the debts of states contribute to the appreciation of the dollar, even in the face of a decline in its purchasing power.

6. The exchange rate ratio of currencies is also affected acceleration or delay of international payments. In anticipation of a depreciation of the national currency, importers seek to speed up payments to counterparties in foreign currency so as not to incur losses when the exchange rate increases. When the national currency strengthens, on the contrary, their desire to delay payments in foreign currency prevails.

7. The degree of confidence in the currency in the national and world markets. It is determined by the state of the economy and the political situation in the country, as well as the factors discussed above that affect the exchange rate. Moreover, dealers take into account not only the given rates of economic growth, inflation, the level of purchasing power of the currency, the ratio of demand and supply of currency, but also the prospects for their dynamics.

8. Currency policy. The ratio of market and state regulation of the exchange rate affects its dynamics. The formation of the exchange rate in the foreign exchange markets through the mechanism of supply and demand of currency is usually accompanied by sharp fluctuations in exchange rates. The market develops a real exchange rate - an indicator of the state of the economy, monetary circulation, finance, credit and the degree of confidence in a particular currency. State regulation of the exchange rate is aimed at its increase or decrease based on the objectives of the monetary and economic policy. For this purpose, a certain monetary policy is being pursued.

Other factors affecting the exchange rate:

1. Publication of important economic data in the media: inflation rates, balance of payments deficit, unemployment rate, discount rates, stock indices, stock prices, bonds, GNP, election race, etc.

2. Large transactions of commercial financial organizations.

3. Exchange rate factors, the impact of which cannot be predicted (we are talking about wars, revolutions and other cataclysms).

4. The Central Bank can have a direct impact on the exchange rate by buying or lending currency in large quantities. This causes sharp fluctuations in the ratio.

5. Insurance, pension and other funds invest cash into currencies, trying to avoid the risks of devaluation. Such transactions - especially with large amounts - significantly affect the country's exchange rate.

6. The cost of gold and oil.

Thus, the formation of the exchange rate is a complex multifactorial process, due to the relationship between the national and world economies and politics. Therefore, when forecasting the exchange rate, the considered exchange rate factors and their ambiguous influence on the ratio of currencies depending on the specific situation are taken into account.