Before October 2008 the interest rate in US was high compared to after October the interest rate was below 1% and by November and December it was around 0.15%. If we look at the interest rate provided by US Federal Reserve, in 30th of September 2008 interest rate was 2.03 percent and 1st of October 2008 the interest rate was 1.15, if we look at the exchange rate provided by x-rates on 30th of September 2008, 1 Euro was 1.408 USD and 1 GBP was 1.7801 USD. On the 1st of October the exchange rates: 1 Euro was 1.405 USD and 1 GBP was 1.779 USD. During these two days the interest rate was not below 1 percent but there were some changes in USD. If we look at the interest rate on 2nd of October when the interest rate was 0.67 percent, 1 euro was 1.384 USD and 1 GBP was 1.764 USD. The US dollar got stronger by day in these three days, on the 3rd and 4th of October the interest rate was 1.1 percent and it increased compared to 2nd of October and 1 Euro was 1.381 and 1 GBP was 1.773 USD. We can see that USD got weaker to GBP and USD was stronger to Euro. It shows that some currencies respond towards the interest rate more efficiently compared to other currencies. Interest rate is one of the factors that can have impact on the USD but there are other factors that impacts on the exchange rate. According to US Federal Reserve, after 2009 the interest rates were below 0.2 percent, but the exchange rates during this year was very interesting. In March 1 Euro was 1.4178 USD but starting from April and by December 1 Euro was 1.621 USD. During this year USD got so much weaker even that interest rate was stable below 0.2. It shows that the interest rate have some impact only in short period of time, but in long period the exchange rates will depend on other factors. One of the other factor that influences is the price of oil. Another information I found interesting is the Foreign Exchange Data provided by New York Federal Reserve. They do not provide daily data, therefore it is hard to use this as an information to predict the future interest rates. In this Foreign Exchange Data they show how much of other currencies were bought and how much of USD was sold to other currencies to banks around the world. It would have been one of the best ways to know the exchange rates if the data was provided more frequently but the latest one is on 2013. It could have been predicted with Demand and Supply method. I suggest the best way to predict the future exchange rate would be watching the news, because the politics have great influence on the exchange rate. Exchange rate does not only depend on the US economy but it also depends on the economy of other countries. If you are foreigner in different country, exchanging money can be really costly or you could just take advantage of it and even make some money. In most of the countries the banks offer foreign currency account and they will link that account with your local account. For example if you live in Europe and you have euro account then you can also open US dollar account or other currencies. When you send money from your euro account to USD account or vice versa, you will save money on because banks offer best rate when you make transactions among your accounts. If you live in US or in Europe and you don’t really know how the forex trading works and if you want to hold your foreign currency for longer because you predict it will change in longer period of time then you can use your currency accounts and do exchanges among your accounts. Since I have strong finance and economics background, I love predicting the currencies. I know the types of information that will give small abnormality on the exchange rate. Another advice I can also give is that when you make international transactions use the currency accounts rather than your local account. For example if you study in US and your parents from Europe wants to send money to your account then let your parents send money to your euro account in US. Alternatively, your parents should send money from their euro account to their own USD account in Europe and then send from their USD account to your USD account in US. It is almost impossible to make so much money on exchange rate with small money because the margin is very little, but you can save a lot of money if you are going on holiday or if you need to exchange a lot money. |
AuthorEcon2u and others CategoriesArchives
July 2017
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