In the financial domain, the currency conversion rate or the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two international currencies specifies the estimated worth of one currency in terms of the other currency. If defined in other terms, the currency conversion rate could be defined as the value of a foreign nation’s currency in terms of the currency of the home nation. On the same lines, currency converter could be described as a method or tool, which helps in estimating the value of one currency in terms of other currency. The currency conversion market is cited as one of the largest capable markets in the world. If we go by statistics, approximately 3.2 trillion US Dollars worth of currency is converted every day around the world.
Money is a type of medium, which is accepted across the globe in an economy as payment by sellers of goods and services and as debt payment by creditors. Money essentially acts as a medium of exchange between two serving parties and without money; the world would have to start bartering in the respective businesses. Barter could be defined as a direct exchange of services and goods with some other services and goods. For example, a PC owner who wants to have a new mobile phone must find a mobile phone user who is in need of a PC, which means that there must be desire to exchange goods and both the parties should also be in a need. One more essential condition is that the exchange should be equal in terms of monetary values. If there is not a need from both the parties at the same time, the PC owner have to undergo several trading steps involving exchange of the PC with a refrigerator, a refrigerator with a microwave oven and then, the oven with a mobile phone.
The ownership of money with an individual means that the individuals are not required holding a big collection of goods and services as exchange inventory. Similarly, a nation’s currency allows the citizens to do the type of job best suited for them and receive money payments for the job done by them. Afterwards, the individual can exchange the currency with other goods. Currency usage thus helps the individual in acting as a medium of exchange by allowing him/her to follow one’s area of excellence. Similarly, he/she can get the currency converted if one is traveling to another country.
In the same way in which money aids facilities’ exchange in a single nation economy, currency exchange helps in the exchange of services and goods across the geographical boundaries of different countries. For example, if Japanese purchases a foreign product, such as an American car, the amount is paid in Japanese yen but the American czar maker can’t pay salaries to its workers in Japanese yen. The salaries have to be paid in American dollars, which is required by its workers to buy products in American markets. There must be a way so that the Japanese yen could be exchanged with American dollars. This exchange takes place in a foreign-exchange market, which for this case, applies to the exchange of yen with dollars.
For most of the citizens of various countries, the direct involvement with various currency converters takes place when they travel to different other countries across the globe. In all such scenarios, small changes in currency conversion, as shown on a world currency converter, is bound to be looked as insignificant. But on a bigger scale, where trading is done in millions and billions of currency units, small changes can lead to big results.
When a world currency converter depicts that the currency of a particular country is strong, the citizen of that country can purchase foreign goods more cheaply. For example, if the US Dollar is strong as per the world currency converter, the US citizens are able to buy foreign goods cheaply. But in contradiction, foreigners to US have to pay more for the US-made goods. The demand for US-made products then declines, thereby affecting US companies that generate products for exporting purpose.
In currency converter theory, a declining or softening US dollar on a world currency converter should result in improving the trade balance, as exports should ideally rise. However, this is not always the case and the balance of trade actually falls in the short term. This is because of the reason that often, the orders for various products are placed well in advance. On the depiction by the world currency converter that the value of a particular currency has dropped, all the imports remain the same but there is an increase in the domestic prices. The value of exports of the country thus remains firm, but the difference in these values affects (actually worsens) the trade balance – at least till the difference adjusts itself to the revised foreign exchange rates, which are depicted on a world currency converter.