What is the currency rate?

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What is currency rate

Also named as Exchange Rates

Currency rate is  a term which is  simply the price value  of the current currency you have compared to the price value of the other currency

For example, when  we say that the price of one US dollar  is $ 1.11270 Euro, when you buy a Euro currency, here, you sell the dollar you have and Vice versa.

Thus, in order to obtain currency, another currency must be paid for it.

Why do people buy currencies from other countries?

When a dealer from Malaysia, for example, buys goods from Europe, he must pay the goods in a currency acceptable to the European seller. Often, the European seller will not accept the monetary value of a Malaysian Ringgit but wants to get his commodity values in a currency acceptable in most countries of the world such as the US dollar, the euro, the pound sterling or even the Swiss franc.

 

Here, the Malaysian trader has to replace the Malaysian Ringgit that he owns to buy Euros to send to the European seller for the goods he wants to buy from him by monitoring live currency rate to know the exact current value of desired currency he wants to buy!

Similarly, if a Malaysian tourist wants to travel to a European country for the purpose of tourism, he must buy in his local currency the European currency (euro) to be able to pay goods and services purchased in European territory.

These are the main reasons why a person buys another country's currency.

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Of course, in order to buy something you should know its price.. Similarly, when you want to buy a currency, you must know the monetary value in some other currencies which called currency rate.

What is High and low exchange rates (currency rate)?

And What is Supply and demand theory?

You know that when demand for a commodity increases, its price rises, and when demand drops, its price drops.

When the number of people who want to buy a product exceeds the number of those who want to sell, the product will cost more.

This is called low supply and demand theory.

This law applies to currency rate  as applied to anything else.

If the number wanting to buy a currency is greater than the number of sellers, the price of this currency will rise.

 

If the number of those wishing to sell a currency is more than the number of buyers, the monetary value of this currency will decrease.

For example, if you go  to a bank and asked about its cost of replacing the dollar almost against the euro and the result was that the dollar = 1.11270 euros

Here you have to pay 1.11270 euros for $ 1.

But if many people want to buy the euro, the cost will rise to € 1.11300, for example, the greater of people who want to pay the dollar against the euro, the value of the euro against its dollar will increase gradually.

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Major currencies in the currency rate

Every bit, you know, each country possesses its own currency and the international market gives each currency a special symbol known to ease the interaction between traders without mistakes,

For lesson, may be similar to several countries dealing  with the dollar, is the name of the currency of the United States of America and the currency of Australia and the currency of Canada and many nations.

Thus to avoid mistakes in  trading, it is internationally agreed that the currency of each nation will be thrown its own symbol known worldwide.

For instance, the US dollar symbol is USD

The Canadian Dollar Symbol is CAD for Canadian Dollar

The Australian Dollar symbol is AUD for Australian dollar

Thus, for each currency a country follows its own symbol.

In principle you can deal and buy the currency of any nation in the world. But trading in the currency market is mainly focused on four currencies:

Euro: The European currency and EUR symbol.

JPY: The Japanese currency and the JPY symbol for the Japanese yen.

GBP: British Pound (GBP) for Great Britain pound.

CHF: Swiss currency and CHF symbol for Franc.

In the currency market, 80% of the trading takes place in the previous four currencies.

But for what?

When you want to buy the yen what you will pay for it

Dealing with previous currencies is all against the US buck.

Remember, currency trading takes place in the form of pairs when you buy a currency, you must sell against it another currency and vice Versa as mentioned before

 

You may wonder: Why do most transactions take place in these four currencies?

Can not buy and selling other currencies?

The Answer: Have you ever remembered about moving to a cashier and asking for Thai bat? !!

If you examine it you will find it hard to get a cashier selling you Thai Baht

Why?

Because few people are able to use the Thai currency in your land.

If you proceed to the cashier to purchase or sell the US dollar or the pound sterling, for instance, you will get them easily, because there are many people dealing with these currencies are acceptable not only in the United States and Britain, but from different countries in the Earth, that the demand for them is high.

 

 

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Because the euro, the yen, the pound sterling and the US dollar are the currencies of the countries with the largest saving in the globe, and because most transactions between states and individuals are in one of these currencies.

As for the Swiss franc, the Swiss economy is not comparable to the deliverance of the previous four countries, but the international custom has made the Swiss economy and its franc currency a safe haven in the big international ports. You know that most of the world's rich people keep their money in Swiss banks.

And because the US dollar is the most significant of these currencies at all.

It is the principal currency for every previous four currencies.

When you buy the euro you pay the dollar and when you sell it you get a buck.

When you buy the Swiss franc you pay the dollar and when you sell it you get a buck.

As well, every bit for the yen and the pound sterling.

The US dollar is the common currency against all currencies where each other currency is treated separately against the buck:

EUR / USD

GBP / USD

USD / JPY

USD / CHF

These four currencies are called when sold and bought against the dollar in major currencies.

Other currencies in the currency rate

In addition to dealing with the previous four currencies against the dollar, you can also sell and buy currencies of other countries in the currency market also against the buck such as:

USD / CAD.

AUD / USD.

Of course you can buy any currency against the dollar, for example, you can buy the Saudi riyal and sell the dollar.

But in the international currency market, the majority of speculators do not exceed the currencies we have mentioned and 80% of the deal is centered along the four major currencies against the horse.

This gives traders the advantage of centering on the currency market than other traders in other marketplaces

Crosses Currencies in the currency rate

You may question what if I want to purchase a currency without paying the US dollar, but I pay - sell - some other currency?

What if I wanted to buy the Euro and sell the pound sterling? Is this really possible?

Answer: Yes. We have read that you can buy and sell any currency to any other currency.

You can buy the Euro and sell the GBP

EUR / GBP.

You can buy CHF and pay a JPY

JPY/ CHF.

Thus, you can buy any currency against any other currency without the need for the US dollar.

Currencies are called to be bought or sold against currencies other than the US Dollar in the Crosses or cross currencies.

The most popular currencies that are traded in the currency market are:

EUR / GBP.

EUR / JPY.

EUR / CHF.

GBP / JPY.

GBP / CHF.

However, as mentioned above, the vast majority of traders focus on buying and selling the four major currencies mainly, and some prefer to trade in some cross currencies.

At the beginning of your line of work, we recommend that you trade currencies by focusing only on major currencies

After you have moved on to an advanced level of knowledge and experience, you can move to Crosse  currencies.

In fact, the four major currencies with the cross currencies we mentioned earlier capture more than 95% of trading along the international currency exchange.

Base and quote currency in the currency rate

We require you to pay attention to a basic level:

Now learn that the monetary value of a currency is what you must yield for some other currency.

For example: GBP / USD = 1.6

The question is the substance of the previous formula that we possess to pay $ 1.6 to obtain one pound or should we pay 1.6  pounds for one buck?

In this formula: USD / JPY = 130

Does that imply we bear to pay 130 yen for one dollar or do we possess to pay $ 130 to get one yen?

The currency whose symbol first puts on the convention is called the base currency

The other symbol is needed for the defrayal of the second currency to obtain one unit of the base currency called the quote currency

Remember that one..

When we said: GBP / USD = 1.6

The recipe is the sum of money needed for the defrayal of the second currency (the dollar) for one unit of the base currency (GBP)

That is, we suffer to pay $ 1.6 for one pound.

When we say: EUR / USD = 0.88

The euro is first laid in the pattern. The base currency in this currency rate  is the euro.

 This entails that the price in the formula is the sum to be compensated from the second currency (dollar) for one euro (one unit of the base currency).

That is, we are here to pay $ 0.88 for one euro.

This principle applies to all currencies

Direct and indirect currencies in the currency rate

In the currency market, the euro and pound sterling are the base currencies against the dollar, and therefore are the first to be symbolized

As follows: EUR / USD and GBP / USD.

The price to be posed in front of either of the two previous versions is the quantity to be compensated from the dollar to get one euro or one pound.

Currencies that are the base currencies  against the US dollar and  whose symbol is placed before the dollar symbol called Direct currencies

 

Direct currencies in the currency most significant currencies in the international currency market are

EUR / USD

GBP / USD

AUD / USD

While In the currency market, if the dollar was the base currency against the yen and the Swiss franc. The dollar symbol is first laid in the formula and then the yen or swiss franc is placed.

 Follows: USD / JPY and USD / CHF.

When we say: USD / JPY = 120

That implies that the yen is required to pay ¥ 120 for one dollar. Since the buck is the base currency.

The currencies against which the dollar is denominated are the base currency of the indirect currencies

 

Indirect currencies in the currency rate

Are the currencies in which the dollar symbol is placed before it and the dollar is the base currency

The most significant currencies in the international currency market are

USD / JPY

USD/ CHF

USD/CAD

 

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