Lessons Learned About Currencies

Foreign Exchange – 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.

How currencies exchange in the foreign exchange is of great interest to a country and its citizens especially those involved in international trade. The importance of this is pegged on how a small change in exchange rates could affect business tremendously. The ability to precisely predict how foreign exchange markets will fluctuate from time to time is therefore a very important piece of knowledge for business people. The main focus point when considering foreign exchange conversion is any other currency against the United States Dollar. This is mainly because of the extent over which the dollar is used in international trade.

Let us focus on the conversion rates of 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. This exchange rate is however not fixed since it fluctuates from time to time. This brings us to the important point of the determining factors for exchange rates between two currencies. There are several reasons that affect conversion rates of the dollar to other world currencies.
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One of the factors that affect exchange rate are inflation. 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. It is for this reason that countries must ensure that there is as little inflation as possible so as to cushion their currencies against fluctuations.
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It is possible to have interest rates that apply to a country affecting how the currency of the country exchanges to other currencies in the foreign market. 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. To achieve stable exchange rates of the Naira in Nigeria, the government has cushioned citizens against huge interest rates. Government debts and balance of payments are also important factors that dictate how the Naira compares to the dollar. Political stability and market speculation are non economic factors that also affect foreign exchange.