Exchange Rates – Dollar to Naira
The current century has seen a huge growth in international trade. There are therefore many people who are engaging in business activities within their countries as well as outside the borders of the countries. Such trade necessitates the use of foreign currency at certain times. An example is in the constant use of both the American dollar and the Nigerian Naira by business men and women who trade between United States and Nigeria. This is what makes foreign exchange very important particularly to business men and women.
An important factor to consider for many business people including governments are the rates of foreign exchange. This is vital since a small change in rates of foreign exchange could consequently lead to huge financial changes in the market. Being able to observe and forecast foreign exchange markets is therefore important to business men. The American dollar is usually the main comparing point for most currencies world wide. This is because the Dollar is arguably the most commonly used currency in international trade.
Let us pay attention to the current and general exchange rates between the Nigerian Naira and the American dollar. In the first instance the current exchange rate of the Naira is three hundred and fifteen Naira to one American dollar. The rate keeps changing periodically as dictated by different reasons. This brings us to the important point of the determining factors for exchange rates between two currencies. It is important to note that different currencies convert at different rates to the dollar at different times because of several reasons.
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Inflation is a key factor that dictates how currencies exchange in the foreign exchange market. Inflation basically affects the commodity markets which in turn affect the value of currencies. For instance, when prices of basic commodities in Nigeria go up tremendously within a short period of time, this has an effect on the dollar to Naira exchange rate. This is why countries must put up measures that protect their currencies from fluctuation as occasioned by inflation.
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Interest rates also affect exchange rates of the country’s currency. In a case where interest rates are raised by Nigerian banks it is possible to have this creating an effect in exchange markets on how the Naira exchanges to the dollar. The government of Nigeria has ensured that interest rates are moderated to protect the Naira against fluctuations in foreign exchange markets. Government debts and balance of payments are also important factors that dictate how the Naira compares to the dollar. Other non economic factors that dictate this rate include political stability of the country as well as market speculation.