For some of us, the working of a Money Changer is like a mystery. Countries have different currencies and each currency has a different value. The value of the currency changes according to the economic conditions of the country. The currency rates change almost daily.
How does Money Changer Work?
The Forex (FX) is the market place for currency exchange. It does not operate in a particular country, unlike the stock exchange, i.e. it is decentralized. When you buy currency or sell a currency, i.e. when you go to a Money Changer you access The Forex Market. Suppose the company you work for is based on some other country, you access The Forex Market each time you get your salary.
Many businesses and international trade require Money Changer in Delhi to exchange currency daily. Most of the banks are also international. They too need to access The Forex Market. These are the reasons why the Forex market is the biggest in the world with over 5 trillion dollar trade daily.
There are forex traders who buy the currency which is currently not doing very good and is expected to grow in recent days. Once the currency rates rise they sell that currency and buy some other currency. The best traders can predict the changes in the economy and influence the currency rates in the international market.
When is The Forex Market Open?
Forex Market is open for 24 hours a day and it opens only 5 days a week. There is always a day in some of the other countries at the same time. That’s why the forex market needs to be open for 24 hours. It is closed on the weekends. However, a normal person can exchange the currency during the weekends also. However, the broker (the Money Changer) will exchange that money in the international market after the market opens.
How are Currency Rates Determined?
Currencies are priced the same way as goods. The currency with more demand is costlier than the currency with lower demand. Yes, they work on the principle of demand and supply.
Some events might make a specific country’s currency more popular and everybody suddenly wants to buy that currency. However there might be a limited amount of that currency available. Due to high demand the cost of that currency immensely increases. For example, if at a particular time the Indian economy gets stronger and some investors from other countries such as Europe want to invest in Indian rupee, the cost of Indian rupee will suddenly increase and other countries will have to pay more to buy rupees.
How Currency Rates Fluctuate?
Similarly a currency can become less attractive too and those who own that currency might want to sell that as soon as possible and the currency becomes short of buyers. The low demand and high availability lead to a decrease in the value of that currency. Now the buyers will not spend too much on them. Now suppose the investors from Europe realize that the Indian economy is at great risk, they might now want to sell the Indian rupees they bought. But, nobody will want to buy rupees at the same rate at which it was sold earlier because of the high availability and low demand for the rupee. Hence, the rupee will be worth lesser in this case.
And of course, the rise and fall in currencies are relative. In one of the currency rises, the other falls. For example, if European traders are buying Indian rupees through the Money Changer and the rupee rises, the European euro will fall at the same time and vice versa.