Go back to: General discussion
1) Why do countries have currencies with different values to each other?
Countries have different currencies with different values because their economies performances are different from each others. Also, because their reserve of gold is not the same and this will be reflected on the value of their currencies.
Currencies demand and supply mechanism on the international market can also affect the values of various countries currencies.
2) How does a nation gain and / or lose when the value of their currency fluctuates?
A nation can gain from its currency fluctuation though the increase of its exports, because a low currency value means high buying power for other nations (importing nations). Tourism also will flourish while the currency value is low.
But the same nation can lose in terms of international trust in economic and investment context. Also, its buying power will be very low the thing that will affect the exterior supply, and thus the local prices will go higher and buying power of the population will suffer.
3) How can government actions (central banks) affect the value of their currency and why do they do so?
Central banks can affect the value of the national currency through amending its interest rates.
Also, the administration (central bank) can take a decision to devalue the national currency for some reasons. I think it is an administrative action, or may be is going to flood the market with the currency so we can see its value going down.
4) How does a currency trader make and lose money?
When a currency trader buy a quantity of money, he can lose if the currency has less value while selling, and he can gain if the value of the bought currency goes up.
The Assignment
1) Why do countries have currencies with different values to each other?
Countries have different currencies with different values because their economies performances are different from each others. Also, because their reserve of gold is not the same and this will be reflected on the value of their currencies.
Currencies demand and supply mechanism on the international market can also affect the values of various countries currencies.
2) How does a nation gain and / or lose when the value of their currency fluctuates?
A nation can gain from its currency fluctuation though the increase of its exports, because a low currency value means high buying power for other nations (importing nations). Tourism also will flourish while the currency value is low.
But the same nation can lose in terms of international trust in economic and investment context. Also, its buying power will be very low the thing that will affect the exterior supply, and thus the local prices will go higher and buying power of the population will suffer.
3) How can government actions (central banks) affect the value of their currency and why do they do so?
Central banks can affect the value of the national currency through amending its interest rates.
Also, the administration (central bank) can take a decision to devalue the national currency for some reasons. I think it is an administrative action, or may be is going to flood the market with the currency so we can see its value going down.
4) How does a currency trader make and lose money?
When a currency trader buy a quantity of money, he can lose if the currency has less value while selling, and he can gain if the value of the bought currency goes up.