3 factors that affect currency exchange rates

Posted by ShreyaJain on April 25th, 2019

Any individual who plans to visit the country of Singapore will have to convert their currency from sgd to inr before going to the country. But there are some factors that affect the exchange rates of a country. Currency exchange is a type of business or a financial institution which has a legal right for exchanging one currency for another currency to the customers. The most common place for currency exchange is the airport, where the traveler can easily purchase the currency of their travel destination or exchange any excess money back to their local currency upon their return.

 Currency exchange may be a stand-alone business, or it may be a part of the services which are offered by a bank or some financial institution. Understanding the working of exchange rates of a country is an essential thing to do before visiting the country. Currency exchange generates profits from the services either through adjusting the exchange rate or taking a commission. Once an individual has the basic information about currency exchange, the sgd to inr conversion will be easy for them.

The 3 factors which affect currency exchange rates are:

  1. Interest rate:

Demand for a country’s currency depends on what is going on in the country. The interest rate paid by a country’s central bank is a huge factor. A high interest rate makes the currency of the country more valuable. An investor will exchange their currency for a higher-paying one. Investors will then save the currency in that country’s bank for receiving a high interest rate. Understanding the working of interest rates will help a customer when they wish to convert their currency from sgd to inr.

  1. Supply of money:

The money supply which is created by a country’s central bank. If a government is printing too much currency, then there’s a lot of it chasing too few goods. A currency holder may bid up the prices of the goods and services, that will lead to inflation. If a lot of money is printed, that will cause hyperinflation. This usually happens only when a country is required to pay off their war debts. This is the most extreme type of inflation.

  1. Country’s economic growth:

Economic growth and financial stability will affect the exchange rates of a country. If the country has a strong, growing economy, then an investor will need to buy the goods and services. They will need more of the currency for doing so. If the financial stability looks bad. People will be less willing to invest in the country. Before an individual converts their currency from sgd to inr, they should consider the economic growth of Singapore before doing so.

Author bio:

Shreya Jain is a professional banker and been working in foreign exchange department for more than 12 years. In this article, she has listed 3 factors that affect currency exchange between SGD to INR conversion

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