Question

What are some of the important factors or current trends that could shape the future of currencies?

Answer 1

Factors which could shape the futures of the currency are as follows:-

i) Interest rate :- Higher the interest rate, means higher the demand for the currency making it more attractive to investors and increasing value of currency.

ii) Inflation rate:- It is good to have some inflation in the economy. But too much inflation is also not good . So, when there is high inflation in the economy, it is a sign that the interest rates will increase and the value of currency would increase.

iii) Economic growth:- Higher the economic growth, more would be the demand for the goods. This eventually will lead to increase in inflation and then the interest rate. This would again attract more investor and make the currency more valuable.

iv) Current account balance:- Higher the current account balance, more will be the demand for goods. This will lead to increase in interest rate and then increase the value of currency , making it more attractive to the investors.