Why Does Dollar Rate Fluctuate?

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Dollar rate fluctuation can effect economic stability of many third world countries i.e. Burma (Myanmar), Cuba, Libya etc. Dollar is bought and sold on specific exchange rates all over the world which varies from time to time depending upon many factors.

Some of the key factors are:

A pack of dollars

Monetary Policy

The state bank of every country keeps an eye on the currency circulation in the country. The supply and demand of the currency effects dollar rate. If the supply of the currency is more than the demand than the dollar rate increases and vice versa.

For Example: If the last price (exchange rate) is 100 PKR as per USD, and more people want to buy USD for PKR than PKR for USD, it will take the USD upwards until PKR buying pressure is even. There is also a profit margin of Forex brokers will also changes the rate according to it.

Political Conditions

If a country is politically stabled then the foreign investment will be done in the country which will bring the dollar in the country and its rate will go down as more dollar is available in the stock market. When political conditions are not stable then foreign investors will lose their trust to invest in the country that will cause deficiency of the dollar in the market and its rate will go up.

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Economic Conditions

The strong economy of the country will boost the local currency value. The local business will grow due to which there would be more chances of exporting goods in the international market and the currency flow in the country from the international market will increase. Some countries devalue currency of their country to increase export.

Trade Balance

As all the dealings in the international market occurs in dollar so if a country’s import rate is more than export rate the dollar price will go up.

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