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Trade Balance

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The fluctuations in the types of change happen due to the variations that exist in the supply and the demand of dollars, pounds and other currencies. These changes in the supply and the demand have two main sources. First, the changes in the demand of currencies depend on the variations in the imports and the exports of goods and services. For example, the exporter of the United States must buy pounds sterling to make the payments of the originating merchandise of England, whereas the British importers must buy dollars of the United States to pay the originating goods of the American Union. If the imports of the originating United States of Great Britain exceeded to the imports of the United States towards the Great Britain, would be a greater demand by pounds than by dollars; this will upwards impel the price of the pound in relation to the one of the dollar. The cost in dollars of a pound could increase from $ 1,7515 to $ 2.000.

In such case, one would say that the value of the American dollar would be depreciating, whereas the pound would be revaluing. In this example. The fundamental cause of the change would be the deficit of the trade balance of the United States with Great Britain. The changes in the demand by a currency and therefore the fluctuations in types of change, also depend on the capital movements. For example, we imagine that the interest rates in Great Britain were higher than the one of the United States. In order to take advantage of the interest rates of Great Britain, the banks of the United States, the corporations and the most dangerous individuals could buy pounds with dollars and even use then these pounds to buy British values of high performance. These purchases would tend to upwards impel the price of the pounds. It is very important to enteder this subject before beginning to operate in the currency market thus to obtain better successful operations and but. I hope that this article has been of its utility, Many Successes!