# How the exchange rate is formed

Exchange rates - one of the key concepts for players market . It is on the fluctuations exchange rates and earns traders. By purchasing a certain currency, a trader expects its rate to grow in relation to another currency. Let's find out how the rate is formed, what it depends on and what an understanding of its trends and a correct forecast can give.

## Official exchange rates

There are official exchange rates. In our country, the Central Bank of the Russian Federation sets and publishes rates of foreign currencies against the ruble. But, as a rule, exchange rates commercial banks differ from the rate of the Central Bank. Therefore, if you need to buy or sell currency, you have to do it at the rates of a particular bank, which in turn, only guided by the Central Bank exchange rates, sets its own, favorable for itself exchange rate.

At the same time, currency quotes can change several times a day. Therefore, when they say that exchange rate is The expression of the value of one currency by means of another currency is not quite correct. To this definition it is necessary to add - "at a certain point in time". This parameter is very important for a trader. After all, at what point in time he bought and sold this or that currency, depends on his profit.

## Exchange rate for

There are currency pairs traded on the market. For example, course currency pair "euro/US dollar" (EUR/USD) is equal to such and such value. Suppose that the euro against the U.S. dollar is equal to 1.2705. It means that 1 euro costs 1.2705 US dollar. You will see two prices on your terminal screen. The lower price is Bidat which you can sell euros and buy a corresponding number of U.S. dollars. The second price Ask - is the price of buying euros and selling the corresponding number of dollars.

Exchange rates on currency exchanges is made up of a calculation of supply and demand for a particular currency. And understanding how and for what reasons this supply and demand is formed, gives an undeniable advantage. A person who is able to analyze the fluctuations of currency exchange rates can not only sell or buy currency profitably. The exchange rate can be a tool to analyze the economy of the country as a whole, not to mention a faithful reference point when taking a loan or buying securities.

## Currency fluctuations

Fluctuations in exchange rates depend on many factors. It is customary to distinguish several major ones that exert the strongest pressure on the weight of the national currency.

First of all, these are. currency issue. If the government begins to print money intensively or to increase the money supply, for example, by lending to banks, it leads to an increase in the supply of national currency. And when the supply of currency begins to exceed the demand, its exchange rate falls.

Another important factor shaping supply and demand for the national currency is trade balance. The pattern is simple: the more exports a country has, the higher the demand for domestic currency, and therefore the higher its exchange rate. Imports, on the contrary, create a supply of currency. And accordingly, more imports result in a lower exchange rate.

There is also such a notion as confidence in the currency. So, for example, if citizens of a country, seeking to protect their savings from risks associated with changes in the national currency, prefer to keep money in euros, then it leads to an increase in demand for euros and its appreciation. The same influence is exerted by large companies, choosing one or another currency when entering into contracts.

But other factors can also trigger movements in exchange rates. Everything from natural disasters to statements by influential politicians can greatly affect exchange rates. It is impossible to predict every movement, but unless accompanied by some real economic event, such movements are short-lived.

Since current exchange rates - The most important information, many information sites publish on their pages operational exchange rates. Usually these are the most popular rates - the Euro Central Bank rate and the Central Bank rate dollar in relation to the ruble. Many websites also offer their users to install the currency rates informer on their computers for free. Thus, anyone interested can have on the desktop of his/her computer an automatically updating information block, which will display up-to-date information about exchange rates and trends of their changes.