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An Overview of Exchange Rate
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Exchange Rate: Understanding the Dynamics of Currency Valuation
INtroduction Exchange rate refers to the price at which one currency can be exchanged for another. It serves as a crucial mechanism facilitating international trade and investment by enabling transactions between parties using different currencies. The exchange rate regime adopted by a country influences its economic policies and competitiveness in the global market.
Factors Influencing Exchange Rates Several factors influence exchange rates, including economic indicators such as GDP growth, interest rates, inflation rates, political stability, and market sentiment. For instance, a country with higher interest rates may attract foreign investment, leading to an appreciation of its currency.