I am Nepal and currently working in Qatar. When I first came to this country. 1 Qatari Riyal equivalent to 16.80 Nepalese Rupees. Couples of months ago It reached to approximately 22.80 NPR.
My question is how does this fluctuation occurs? How one country’s currency become stronger and other’s weaker? Mainly based on what circumstances these being fixed? Please advice me.
eternal student
Favorite Answer
There are many factors that drive foreign exchange rates including capital flows into a country (that creates demand for its currency), its export earnings, it's relative inflation rates, etc.
The value of Qatari Riyal is pegged to the US Dollar.
The value of USD fluctuates freely depending on capital flows.
The value of Nepali Rupee is pegged to the Indian Rupee.
The Value of Indian Rupee floats (but not freely due to restrictions on capital flows) and fluctuates with the USD. Therefore, as the Indian Rupee weakens (or strengthens) against the USD, your Nepali Rupee value of Qatari Riayal earnings will fluctuate.
Small developing nations such as Qatar peg their currency to a major international reserve currency such as the USD to attract foreign investors as well as foreign workers. The perception of possible currency devaluation or potential hyperinflation can scare investors and cause a sudden capital flight inflicting damage to the local economy. The peg eliminates the developing nation's ability to print too much money that can cause hyperinflation. With the peg, worries about currency risk is eliminated and the small developing nation is able to attract foreign capital as well as foreign workers.
demosthenis
The regulations of grant and insist word right here so as that if the fee of one forex is in basic terms too severe it is going to likely be traded much less or never till the fee is decreased. no count if it is in basic terms too low the paying for and advertising would be severe and quickly its value would be raised. even nevertheless that basically 0.5 the tale. products bypass between the two countries in substitute for the money. whilst the fee of a particular form of things in a single united states of america bring about plenty commerce and accumulation of plenty foreign places currencies in the abode united states of america, the substitute value for that forex will drop till the efficient value of the products is larger and commerce will become slower. So it is the two the provision of foreign places currencies and of hand-crafted products that take area in the substitute value and it relies upon on the quantity (on the oftentimes occurring) of all of the paying for and advertising to no count if the substitute value is physically powerful or approximately to compliment the flow up or down.