Tag Archives: foreign currency

More Foreign Currency Exchange Rate Influences

There are a wide range of factors that influence foreign currency exchange rates, and we have discussed some of them on this blog. Foreign currency exchange rates are complicated and are influenced by many different factors as previously mentioned including interest rates, speculation, debt, economic instability, and more. All of these factors combine to influence foreign currency exchange, and the market can be quite volatile and rapidly changing. Getting familiar with the different influences on foreign currency exchange can help you determine when to buy a foreign currency and whether or not it is overvalued or undervalued based on these factors.

Deficits influence rates for foreign currency exchange

A country that currently has a deficit will have its foreign currency exchange rate impacted, usually negatively. A deficit shows that a country is importing more than it is exporting, and it is a sign of economic weakness. As a result there will be a lower demand for that country’s currency, and the country has to borrow foreign dollars in order to pay for its imports which increases demand for other country’s currencies. This is one of the major factors that influence the value of a foreign currency exchange, and many countries have had their currency values suffer due to running a consistent deficit over a period of years, but obviously there are many other factors involved.

Economic or political instability

Economic or political instability is one of the major factors that influence the value of foreign currency exchange; countries that are more politically unstable attract fewer investors because the environment is not conducive to business or economic progress. Economic stability shows that the country’s currency may not represent much in terms of purchasing power, especially if the country has a low gross domestic product and a low amount of experts.

Government intervention affects foreign currency exchange

Governments often intervene as a way to balance or tilt the value of a foreign currency into a more favorable direction. For example, the Chinese government has helped to close the “trade gap” with the United States by slowing the appreciation of the Yuan against the U.S. dollar through several interventions including buying U.S. dollars and purchasing U.S. treasury securities, as a way to keep surpluses of dollars out of exchange markets. Dollar surpluses would cause the Yuan to rise in value against the dollar, which is undesirable because China benefits from a strong dollar, and a weak dollar compared to the Yuan would lead to decreased imports from China.

How Exchange Rates Work When You Buy Foreign Currency

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If you buy foreign currency on a regular basis or travel to foreign countries, it pays to know a bit about how currency exchange rates work. For instance, the dollar regularly falls or gains against foreign currencies, and there are several factors that can influence this. If you travel to a foreign country, you cannot buy local goods with your country’s currency, which is why you need to buy foreign currency either before you travel or after you arrive at your destination. When you buy foreign currency the exchange rate is the amount of a foreign country’s currency that you can buy with a quantity of your own country’s currency.

An example of a currency exchange rate

For instance, if one U.S. dollar will buy you approximately 100 Japanese yen, the exchange rate is 1USD = 100JPY. The exchange rate that you get when you buy foreign currency is based on several factors including supply and demand, inflation, gross national product, foreign investment and other complicated influences. In general, the amount of a foreign current that you receive when you buy foreign currency is dependent on what the market is willing to pay for it that day. The exchange rate is one of the most important factors that determines how stable a country’s economy is.

Look up the exchange rate when you buy foreign currency

Before you buy foreign currency you should be sure to look up the exchange rate for that day, and you should know how much your currency is worth before you travel. Exchange rates are free floating which means that they constantly fluctuate against each other. A higher demand for a particular currency will cause the value or the price of the currency to increase, which means that you will be able to buy less of the currency with one unit of your own currency. If the value of the yen increases against the dollar for instance, the exchange rate may change to 1USD = 90JPY.

Consider currency exchange rates before you pick a country

Due to the fact that exchange rates fluctuate so much you may want to research which travel destinations will offer you the best exchange rate for your currency. For example, the dollar is currently high in value compared to the currency of several other countries such as Thailand, India, Costa Rica, Ecuador and others. These countries can be great destination choices as a result of this, because when you buy foreign currency with the dollar you will get a greater quantity of the country’s currency per dollar than other countries.

Make Money Selling Money? Why Foreign Currency May Be a Smart Investment

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Diversify, diversify, diversify: It’s among the most common — even cliched — advice from financial experts to investors.

But what if you want to go further with that than the usual methods of playing different sectors in the stock market, or putting a share of your portfolio into conservative bonds or riskier international markets?

You might consider trading foreign currencies, which just a couple of decades ago was an option mostly restricted to big money investors. Now, it’s widely available to the general public, and generating increasing interest.

And in today’s age of social networking, foreign exchange has gone social too: In addition to seeing that a friend “liked” a photo or a business on Facebook, you can now trade on sites that let you see when that friend bought Swiss francs or sold yen.

Foreign currency trading, which became possible for the average investor about 15 years ago, has added that social aspect — and been made all the easier — thanks to online brokers like Xchange of America. The idea behind their sites is to remove as many barriers to entry as possible, so that anyone — not just savvy investors, can use them.

A Risk, But a Limited One

As exciting as the adrenalin rush of foreign exchange trading can be, it requires as much homework as any other investment, and even then, of course, there are no guarantees. As with any investment, the odds can turn against you. But currency trading offers a bit of protection by being a bit less flexible: You can’t buy any nation’s money on margin, so unlike equity trading, where a bad leveraged buy can leave you owing more than your initial investment, in the currency exchange market, your risk is limited. Though forex trading can help you take advantage of market changes at home, the true advantage can be more global.

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Polymer plastic money, the best counterfeit protection technology available today?

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In an effort to combat counterfeiting and reduce costs over time, more countries are producing polymer banknotes. is just the latest in a long line of countries that have either fully adapted to polymer notes, or simply created a commemorative note or single denomination in polymer.

Polymer banknotes were originally developed by the Reserve Bank of , Commonwealth Scientific and Industrial Research Organization and The University of Melbourne and were first issued as currency in in 1988. This type of banknote was created to incorporate many security features not available to paper banknotes, making counterfeiting much more difficult. These new notes made of plastic polymers also greatly enhanced durability of the notes.

These “plastic” notes are made from a non-fibrous and non-porous polymer which compared to paper banknotes are more durable, harder to tear, more resistant to folding, more resistant to soil, waterproof (and washing machine proof), easier to machine process, and are shreddable and recyclable at the end of their useful lives.
Of course, there are also disadvantages to adopting the polymer banknotes. They are harder to fold and when creased become difficult to bring back to an original flattened state. The notes are more slippery, which makes them harder to count by hand. Polymer notes cost more to produce in the short-term, which could be a drawback for developing countries. And, even though the notes are recyclable, some less developed countries may not have the facilities to recycle them – and when they burn they pollute the air.

As of 2011, at least seven countries have converted fully to polymer banknotes. Some of the more recent adoptees include:

Canada, having released the savvy 100 dollar note and 50 dollar note in recent months, the remaining denominations will be circulated within the next year.

Guatemala has issued a 5 quetzal note in 2011 to follow the 1 quetzal note that was issued as a polymer note in 2007.

Chile started in 2009 by introducing their new 5000 peso note and have recently added the 2000 and 1000 peso note to the series.

Cost Rica has very recently redesigned the 2000 and 1000 colonnes notes of which the 1000 was developed in the polymer.

As more countries become advocates of the polymer notes, there are also advances being made in paper banknotes and it is now possible to make “hybrid notes” – paper notes with a transparent window. Tom Hockenhull, curator of the Modern Money exhibition at the British Museum, says that the security gap between paper and plastic notes is closing.

“Paper is much more secure than it used to be and the new British pound 50 note, for example, has features that are extremely hard to counterfeit.”

Meanwhile counterfeiters are making progress with polymer. “Polymer is very hard to counterfeit, but it hasn’t stopped people trying: good imitations do appear from time to time, “Mr. Hockenhull says.

Travel Tips: How to Make the Most of Your Leftover Foreign Currency

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If you’ve ever come back from a trip with some foreign coins jangling in your pocket, you know that your choices are limited: Exchange at a bank, or throw them into a drawer until the next trip. But bank exchange seems like a hassle for what amounts to a few dollars, and if you’re like me, you’re lucky if you remember to pack socks, let alone a tiny bag full of forgotten coins.

Rather than render your hard-earned euros and yen worthless once you’re back on U.S. soil, here are some ways to get the most from them.

• Play Brewster’s Millions at the Airport

Flash back to the classic 1980s Richard Pryor film, and pretend your wealth depends on spending as much money as possible in a short amount of time. Of course, in the film, the budget was $30 million. You may be dealing with a few dollars. No reason not to have fun with it, though. I once spent a layover wandering around the Denpasar airport trying to find something that was exactly 100 rupiah (about $1 at the time). I bought a sticker, and boarded my plane with nary a rupiah in my pocket.

• Use It to Teach Youngsters a Geography Lesson

When my nephew was younger, we used to play “Where did Aunt Molly go?” with a map and my passport. Now, with my older nieces, we’re doing the same thing with currency. Kids love the different colors, designs, and sizes of various currencies, and it’s a fun way to teach them about different lands. And when they’re older, they can look back fondly on the euro from that trip you took this year, and say that that’s when they learned the meaning of a bank run.

• Say, “Gracias Por El Cafe.”

Grabbing a coffee or a sandwich for a flight that doesn’t include either? While many cultures don’t tip, airport restaurants and coffee shops always have tip jars out for the customers who are inclined to do so. Sadly, these jars are often empty. Drop a couple of coins in, and you’ll make someone’s day by the gesture, if not the amount.

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Where Can I Exchange Foreign Currency?

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An item that will always be present in an international travelers’ checklist is a reminder to buy foreign currency, in particular, the money in use at the trip’s destination. This exercise appears simple enough; yet it can become complicated when the travel involves stops in several countries and each particular visit has a very tight schedule. It can be stressful, for instance, to allot time to buy Brazilian money while at the same time worrying about how much is the best conversion value for the Chinese Yuan.

Sure there are a lot of facilities where foreign money can be exchanged. But with the complexities involved in currency exchange, each mode often has an advantage over the other. Learning the particular features of each alternative will certainly enable a traveler to have the right mindset when exchanging money even just for a single trip.

Airport Terminals

Travelers in a rush will find money-changing kiosks or desks at international airports. Such facilities may even be available in plane terminals solely handling domestic flights. Hence, the main advantage of these money changers is convenience, particularly for travelers who have a strict schedule to keep. The money rates available, however, can be disadvantageous and set you back by about 20 percent of the exchanged amount. If you have the time, looking for a better rate should naturally be called for.

Banking Institutions

Currency exchange rates are typically better at local banks than those prevailing at airport money-changing facilities. Banks’ foreign money buying and selling rates are typically based on the previous day’s closing of foreign exchange trading. The banks’ limited days and hours of operations, however, can present a problem if you need to change money instantly. Banks also impose certain limits on the amount of money that can be changed by an individual.

Credit/Debit Cards

The currency exchange features of credit and debit cards are fastest modes available for travelers exchanging currencies. You will be benefited too of the competitive rates available at banks since most credit/debit cards were originated by banking institutions. Be wary though that the card you are using hasn’t been deactivated and that you are within your credit limit when transacting with this facility.

Automated Teller Machines

Exchanging currency via banks’ automated teller machines is also convenient. However, you have to check beforehand if using an ATM other than your bank’s machine carries with it certain fees that aren’t exorbitant. Be sure too that the area where the facility is located is safe and secure, especially if you are in an unfamiliar country.

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