Value of Money

Value of Money



The value of a currency in a country is measured in terms of the other currency. This value is also determine supply and demand. Thus, exchange rates are followed by many investors, especially the countries. The components are so sensitive and influential and even the smallest part of these components can create a butterfly effect in the value of money. These components depend on the economic policies of the countries, the bilateral trade of the countries and the risks with each other. These components are also divided into many points in terms of interest rates, current account deficit and foreign trade.

If the interest rates of an country rises, the currency of that country is generally positively affected by exchange rate changes. In other words, the currency is valued against other currencies. When the interest rates rise, capital owners invest in the country to take advantage of interest rates . And this move make a positive contribution on the value of money.Because, the central bank can put money into the market

Another important factor to do money more valuable is foreign trade. The increase in export rates against imports shows that there is a demand for the goods of that country in the world. This case causes the increase in foreign currency in the country and thus the local currency gains value against the currency.

As a result, the appreciation of one's money depends on the use money in foreign trade, capability of investment and economic &political instability in the country. The components mentioned above are interacting with each other and affect others positevely or negatively.