Currency Exchange rates in simple terms can be understood as the worth of one currency when converted to another foreign currency. There is no fixed exchange rate in this case as there is active trading continuously going on with currencies. This is why the rates keep increasing or decreasing. In other words it’s like a stock market trading or valuables being sold wherein there is no static rate for them. Similar is the case with Currency exchange rates.
A common misnomer that only importers and exporters need to worry about exchange rate. It’s not so. Even you while traveling from one nation to another, will need to convert currencies to the one that is in use in your destination country. So when you exchange currencies, you’ll get different rates of the currency at different points of time.
Now as the data turns complex and spread out and operations become complex by the day, need for API’s has turned imperative. Many such API’s have hit the market. One such currency exchange rate API from Oanda helps with churning out loads of data that is not only reliable but influences a company’s bottom lines.
Let’s dig a bit deeper to understand about Currency Exchange Rates.
Factors Affecting Exchange Rates:
There are several factors that can affect the exchange rates. Here are some:
Rate of Inflation
Market inflation and volatility can affect currency exchange rates. A country having a higher inflation rate compared to another one will witness a depreciation in the value of it’s currency and vice versa. In other words if you go in for exchanging your currency to another one, you’ll get less of the currency you’re changing to because your nation’s currency has gotten suppressed.
Political Stability
The politicians at the helm and the consequent governance of a country can affect its currency’s value. A country for example battling political instability can have a higher risk investment for any foreign investors. It therefore means that the foreign capital in the country could decrease over time due to political uncertainty, and therefore the domestic currency’s value will depreciate.
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Many countries in the world have moved to right wingers ideologies or a tussle between right and left is taking place. These are countries going through uncertain times with high levels of political instability. This consequently leads the currency to severely getting depreciated because of the lack of interest from foreign investors. Foreign investment stays away because of widespread corruption and too much risk involved when investing in a politically unstable country.
Recession
In the current pandemic, it’s the entire world that is facing more or less similar levels of economic distress. However a recession in one particular country can have a big impact on it’s currency. Generally, during recessions, inflation comes down and this may lead to an increased demand for that country’s currency. However, in many other instances, when a country falls into a recession, it’s usually a signal to FDI’s and FII’s that the economic conditions of the country are weak and their currency may thus suffer because of this.
How Exchange Rates Concern You
If you happen to be a traveler visiting a country that uses different currency than yours, then exchange rates variation and values concern you. For example, if you from USA and the US Dollar is strong, you’ll enjoy the luxury of purchasing more forex and enjoying a comparatively cheaper trip. If however, it’s the other way round, then your journey becomes comparatively more expensive and you’ll end up getting less of foreign currency.
Similarly If you’re a businessman involved in importing and exporting, then again exchange rates are a matter of concern for you. If your national currency has higher value than the nation you’re importing goods from, then you’ll purchase more amount of goods but if it’s lower, then you should be ready to pay much more money for those same amount of goods.
As complexities increase and technology enhances, the simple exchange rate processes become too intricate to handle, thereby needing interfaces and automation to function.
How can Exchange Rate API’s help businesses
As large number of consumers and businesses integrate web and mobile apps into their daily routines, businesses are discovering valuable and innovative uses for previously isolated data sources. APIs (application programming interfaces) are tools that assist businesses to put complex data to profitable use.
API’s help meet financial compliance requirements easily while saving money. Auditors, financial controllers, chartered accountants, currency hedging analysts, coders and developers use API’s to track FX movements accurately and consistently which could otherwise have been impossible in view of huge data and multiple fetching involvements.
The ability to automate exchange rate retrieval processes with the touch of a button, convenience auditors and helps your finance department with reliable and accurate rates.
An essentially simple and flexible functionality integral to most API’s help accurately tracks Forex movements and reduces manual errors to almost Nil.
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