It can be a low positive exchange rate when the market is unable to compete in the doldrums. Then the devaluation contributes to the creation of jobs and increase demand for exports. From non-weighted inflation to be a problem in the case of a recession, but in the case of the boom can be a devaluation of the currency exchange rate for the main cause of inflation. In addition to many other problems, including lowering the standard of living as a result of lower cost of imports.
On the other hand that any enhancement in the foreign exchange value can be positive if the increased level of production and competition in a particular market. It can also be negative if this rise as a result of speculation in the market and what it entails negative consequences for exports. The most prominent example of this situation is to enter Switzerland in its exchange rate to prevent the Swiss franc from becoming a strong euro compared to enhance the level of its exports.
If we want to know how you can determine the value of the currency exchange short, it is affected by a particular currency forces of supply and demand. If the demand for a particular currency rose this means higher value of the disbursement and vice versa, you learn to get together when the rise in the value of the currency. We will get familiarized themselves with the two cases in which a rise in the currency: First, when high interest rates and low inflation at the Second Summit. Why?
Because it is likely to attract a higher interest rate to investors' savings are much greater than usual. This in turn leads to enhance the value of the currency as a result of the flow of investors in large numbers to the currency of the local banks. It can have lower inflation than other causes of the high value of the currency rate as a result of increased competitiveness of the country's goods and increase the demand for them.
There are two types of exchange rates. The first type is the floating of exchange which occurs when the government does not intervene at the price of the currency exchange but leave its value is determined depending on the forces of supply and demand price. The second type is known at a price fixed exchange it happens when the government intervene to keep the exchange rate stable against other currencies.
However after that the countries have chosen not to comply with an official exchange rate mechanism despite continuing to try to influence their currencies. For example, China has sought to maintain the currency exchange rate low by buying US assets. The motive behind maintaining a low exchange rate is to increase the competitiveness of its exports, leading to higher growth. Some believe that this intervention is a form of "non-fair competition", and it is called manipulation of the currency's value.
Many analysts believe that if there was a free market in China will likely rise in the value of the Chinese yuan as a result of strong demand for Chinese goods and the current account surplus. However, the Chinese government is trying to prevent currency appreciation by the Chinese central bank to buy US assets, increasing the value of the US dollar compared to the Chinese currency. Add that resulted from the application of the purchase of foreign assets of China's policy to assemble approximately US $ 2.4 trillion of foreign exchange reserves.
