FOREIGN EXCHANGE RATES(2)

Factors that influence the exchange rate:

Penawaraan demand and a currency, which then causes a change in the currency exchange rate, caused by many factors. The most important are as follows:

• Changes in taste (taste) community
Taste communities they affect consumption patterns. So taste the changes in patterns of consumption will change their goods production in the country and the goods imported.
Improving the quality goods in the country providing babkan desire for people to import goods decreased and can also increase exports. While improving the quality of imported goods cause the public to import large increases. These changes will affect demand and supply of foreign exchange.

• Prices of goods export and import
The price of goods is an important factor that will determine the goods in the export or import. Goods in the country that can be sold at a relatively cheap and will raise the export price when it increased the export will be reduced.

• Increase the general price (inflation)
Inflation greatly to the exchange of foreign currency exchange. Inflation, which apply generally tend to lower the value of a foreign currency. Trends such as this occur because of the effects of inflation as follows:

1. inflation causes the price of goods more expensive in the country of prices outside the country and therefore inflation berkecenderungan increase imports. In this situation the request of the foreign currency increases.

2. inflation caused prices of export goods become more expensive, therefore reducing inflation berkecenderungan export. Circumstances such as this will cause the supply of foreign currency will be reduced.

• Changes in interest rates and the level of investment
Interest rate and the level of investment is very important role in influencing the flow of capital. Interest rate and the level of investment that tends to be low will cause capital outflow in the country country. Meanwhile, interest rates and the level of investment that will lead to higher overseas capital into the country. If capital flows to a country, demand for currency increases, the value of the currency increases. Currency of a country will degenerate if more capital flowed out of the country the country due to interest rate and the level of investment is higher in other countries.

• Economic Growth
The effect will be caused by a kemajjuan ekonommi in the value of currency depends on the pattern of economic growth that apply. If progress is mainly caused by export growth, the demand for mid-currency countries that grow faster than the bid, therefore the value of the currency of that country rise