And who determines monetary values?
The answer to Part Two is easy. The value of the currency is determined by the buyers of the currency. These are mainly forex travelers, governments and traders. FOREX means currency. There are many factors that currency traders, governments and businesses take into account when determining the fair market value of a currency.
Fair market value is the price at which a willing buyer and a willing seller come together. The buyer must take into account many factors and considerations in order to try to accurately estimate the value of a currency at all times. There are about 180 different currencies in the world today. Let's look at some of the factors used to determine the value of a currency.
Factors affecting the value of the currency:
1. Political conditions in the country – Includes the stability of government, the level of corruption, corruption and the degree of public order. It also covers the country's relations with other countries, and in particular their relationship with the US, the United Kingdom, China and Russia. The form of government in the country is also a factor used to assess the value of a currency. Consider the very different forms of government in Saudi Arabia, China, the United Kingdom, Venezuela, and Thailand, to name just a few.
2. Economic situation – Includes factors such as employment, unemployment, work ethics, infrastructure, inflation and the direction of the economy. It is older or newer in orientation. computers and high technology, or more cultivation and processing.
3. External perception – The perceptions and attitudes of other countries towards a country are as important as the reality of the real situation in the country. News, the media, movies, newspapers, rumors and spins can create perceptions. How much is known about a country? The less known, in general, the lower the value of a currency.
4. Demographics – A younger population may mean better prospects for the future, people more open to change and growth and an ever-growing workforce. The total population of a country is a factor. How much weight does this country have on the world stage?
5. National Leaders – The openness, credibility and uniformity of visible leaders is a factor. This includes political leaders, sports personalities, business owners and celebrities. Here are some national elements that affect their countries, for better or for worse. Kim Jung Il, David Beckham, Nicole Kidman, Madonna, Osama Bin Laden, Barack Obama, and Vladimir Putin. They help the world perceive a country.
6. Isolation versus openness – Continuous China is becoming more open, more transparent. This helps. Cuba is very closed and isolated. Venezuela is becoming more isolated from some of its recent actions. China's markets are becoming more open. Cuba, Kyrgyzstan, Russia and Japan all have different levels of tolerance with the outside world, affecting the value of their currency.
7. Natural Resources – The type and size of the exploitation of a country's natural resources certainly helps to create a perception of the value or lack of a national currency. Extraction of minerals, forests, oil, fish and other resources is under consideration. Also the state of the art for developing these resources.
8. Weather Factors such as drought, tsunami, earthquake and floods are taken into account. How common and how the country responds to them. They also affect a country's desire, security and perception. Is it a tourist destination?
9. War and Conflict – With what other country is a country at war and who is its ally? Their military might and technology, their willingness to fight and for whom, are important factors in assessing the strength, stability and value of the country's currency.
10. Education – Includes spoken languages, state of the art computer knowledge, internet connection, culture and religion. Scientists, entrepreneurs, writers and inventors are influenced by the type and quality of education in a country.
In conclusion, monetary values are determined by many factors. It is not just an issue, but a complex one by many must be taken into account. In currency transactions, such as FOREX, transactions are usually in pairs. Prices must be something relevant. So how one country does in relation to another country is also important. Common Forex pairs are the US dollar and the Japanese yen, the Euro and the US dollar, for example. These and other factors determine the value of a currency. Some are tangible, some intangible. Some are stable and some are manageable. Sometimes it is the news of the moment and sometimes the long run. That is why exchange rates often change and there is no place or person that determines the value of currencies. And why currency exchange, based on fluctuating currency prices, can be an exciting, profitable, volatile, fun or disastrous form of business or investment.