Currency market and people's lives

What is the currency market and how does it affect people's lives?
Exchange rate is one of the things that can have a direct impact on people's lives. Exchange rate changes can boost or challenge domestic industries by affecting the attractiveness of exports and imports.
The three categories of money, currency and banking are among the most important topics in economics, and understanding them is one of the human needs in today's world.
In general, the exchange rate is the price of one country's currency against another country's currency; This rate affects the economic system and people's daily life. If the currency of the country decreases compared to the currency of other countries, foreign goods and travel become more expensive, so people's desire to travel and things like that decrease. Instead, the increase in the value of one country's currency against the currency of other countries makes people travel more and use foreign goods. Such cases are fully followed in the discussion of international finance.
What is the currency market?
In general, the currency market is a market where the value of the currency of two countries is set against each other and even exchanged with each other. Most countries have a national currency. This currency is the dollar for the United States of America, the franc for France, and the rupee for a country like India. Trade between countries requires the mutual exchange of countries' currencies. When a US company wants to buy goods, services or financial assets from other countries, it must convert dollars into foreign currency and pay its debt.
When the value of a country's currency increases, its foreign goods become more expensive and foreign goods become cheaper. Instead, when the value of a country's currency decreases, the goods of that country become cheaper abroad and the foreign goods of that country become more expensive. In the years 1980 to 1985, the increase in the value of the US dollar caused the industries of this country to be severely damaged because the products of this country were sold abroad at high prices, and on the other hand, foreign products were very cheap in this country.
There are two types of transactions in the foreign exchange market, the common type of which is cash or instant transactions, and the relevant money must be paid within two days after the transaction. Another type of transaction is future delivery, which requires the delivery of the goods and the settlement of the transaction at a future time. In the case of instant or cash transactions, the current exchange rate is used, and for future delivery transactions, the future exchange rate is used.
You cannot refer to a specific place to see how the exchange rate is determined. Currency is not traded in an organized market such as the New York Stock Exchange. This work is done outside the stock market by several hundreds of traders who are mostly banks. On the other hand, because traders are in constant contact with each other by phone or computer, this market is highly competitive, so it functions like a centralized market. However, the important thing to remember is that when banks, companies, and governments talk about currency exchange, it does not mean that they are holding one banknote and want to trade it for another banknote. Rather, this purchase and sale means that a certain amount of currency is transferred from one account to the corresponding account in another country.

Translator :Faeghe Ebrahimpour