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Advice for international investors on how to safeguard their profits
What are the risks? Today, investors are increasingly turning to global markets to find opportunities for profit, giving urgency to the issue of protecting returns from foreign exchange risk. While there are many excellent investment opportunities...
Business and the Forex
The business world is a complex web of supply and demand. Money and goods, physical or otherwise, pass through the global market every single day. To meet this exchange between one country and another, foreign exchange, or forex, was born. The term...
FOREX Trading
Copyright 2005 Dave Markel
The Foreign Exchange market, also referred to as the "FOREX" or
"FX" market is the largest financial market in the world, with a
daily average turnover of US$1.9 trillion - thirty times larger
than the combined...
How Is Forex Trading At Home Possible?
Forex trading has entered the home and lives of many people,
both men and women , from many walks of life. And this is a
relatively new phenomenon. It was only about 10 years ago that
Forex moved into our homes. And this was made possible...
Money Laundering in A Changed World
If you shop with a major bank, chances are that all the transactions in your account are scrutinized by AML (Anti Money Laundering) software. Billions of dollars are being invested in these applications.
If you shop with a major...
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How Does the Exchange Rate Exactly Works?
The exchange market mechanism can be pretty confusing for a person who doesn't have specialised knowledge in this area. The connection between the exchange rate of a currency and its trade deficit may seem like an undecipherable mystery. In order for you to understand the hidden mechanism of the exchange market and the trade deficit, we'll discuss and explain the American-Canadian Trade and Exchange relationship.
The first thing you should know, in order for you to have an accurate idea of this matter, is that Canada is USA's largest trading partner with 20% of the US foreign trade.
Whenever you are analysing a trade relationship between 2 countries, you should look at the exchange rate and international trade data. Make sure you are analysing the data concerning at least 2 years of trade, in order to draw the right conclusions. For instance, if you were to analyse the data for 2002 and 2003, you would notice that the CDN DOL column is displaying the number of Canadian Dollars that can be bought in exchange for one US Dollar. A bigger number on this column means that the US Dollar is appreciating; it gets stronger and can buy more Canadian Dollars. On the other hand, whenever the number is decreasing, it means that the US Dollar is depreciating, it gets weaker, and it can buy less Canadian Dollars.
You should also pay attention to the second column, named CDN DEF, which is displaying the amount of the trade balance between the United States of America and Canada. If you find only negative numbers in this column, you should know that this
fact means that US is facing a trade deficit when it comes to its Canadian trade relationship. You should also keep in mind that the numbers in this column are usually expressed in millions of US Dollars.
A quick look on the data for 2002 and 2003 will instantly tell you that the US Dollar has depreciated quite fast compared to the Canadian Dollar. For instance, the data for October 2002 shows that 1.58 Canadian Dollars were bought for 1 US Dollars. But the data for October 2003 shows that 1.32 Canadian Dollars were bought for 1 US Dollars, meaning that the US Dollar's strength has weakened.
Nevertheless you will notice that the trade balance remained the same over that period.
If you wonder about the connection between the exchange rate and the trade balance, well, here it is. The relationship between these two is quite simple: whenever the exchange rate goes up, the trade is going down, and the other way around. A positive number shows that the trade deficit increases when the exchange rate is going down.
In conclusion, whenever you analyse the relationship between the exchange rate and the trade balance, you will come across the numbers for the trade deficit. Always keep in mind that things aren't as simple as they look, so, in order to reach an accurate conclusion, you have to analyse a lot more numbers than these. About the Author
For any information regarding exchange rates, euro, dollar just visit us at http://www.myexchangerates.com
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Forex Online Currency Trading: Welcome to Global Forex |
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Finance - Currency-Trading Ezine Articles |
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