Increase the Value of Your Local Currency
Essay Preview: Increase the Value of Your Local Currency
Report this essay
Exploratory study on increasing the value of the local currency
Youssef Alaadin (W1002269)
The German University in Cairo
MBA Program
International Marketing
What is the definition of currency? It is an accepted medium of exchange. These are usually the coins and banknotes of a particular government.
How the currency value is determined? Simply it was decided according to type of useful commodity that can be traded for. Formerly it was decided according to gold backup (fixed exchange rate).
Exchange rate: exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies is the rate at which one currency will be exchanged for another, Exchange systems are fixed and floating exchange systems.
Fixed Exchange rate: A fixed exchange rate, is a type of exchange rate regime wherein currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. And it is decided by the government.
Floating Exchange rate: A floating exchange rate is a type of exchange rate regime whereas a currencys value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency.
The foreign exchange market: (forex) is a form of exchange for the global decentralized trading of international currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock. The foreign exchange market determines the relative values of different currencies.
What Economic factors affect the currency?
Appreciation: When there is an increase in the value of one currency in a floating exchange rate. This may indicate a low rate of inflation, it also makes exports from the country with the appreciating currency more expensive, while making imports less expensive.
Depreciation: When there is a fall in the value of a currency in a floating exchange rate due to supply and demand side factors. If the government sold a lot of pounds they could help the depreciation.
Revaluation: When a country makes a decision to increase its exchange rate in a fixed or semi fixed exchange rate.
Devaluation: When a country makes a decision to lower its exchange rate in a fixed or semi fixed exchange rate.
So we might be more concerned with the floating exchange rate system, as it is the situation for the Egyptian pound, therefore the important question is “What factors affects the fluctuation of the currency value?”