Question

In your opinion, what are some of the important factors or current trends that could shape the future of currencies? (about 250 words)

Answer 1

I can tell you that there are many economic factors to take into cosideration when it comes to evaluating a currency's strength.Below are the some factors;

i)Interest Rates: Interest rates are the amount it costs to borrow money.The higher the interest rate usually means the higher the demand for that currency.Lower interest rates usually decrease the demand for a currency.The mechanism behind this can take some time and effort to fully comprehend,but the general take away is,higher interest rates make a currency more attractive.

ii)Economic Growth:The strength of an economy can go a long way to boosting the strength of the nation's currency.Foriegn investment and demand from companies abroad can also play an important factor in boosting the loacal currency of a strong economy.

iii)Inflation:It is defined by the rise in prices of goods and services.Higher prices may not seem good to a consumer,but it is generally considered healthy for a country to have a moderate increase in inflation in a growing economy.In a growing economic environment,rising inflation rates will tend to incresse expectations that interest rates will rise,which in turn make traders have a positive outlook for the rise of the currency.