Finance, Forex and Investments

how are currency exchange rates are fixed?

I wanna know how are exchange rates fixed for currencies, like we hear fluctuations in dollar price against rupee, in past ten months US $ has increased by 10 against the Indian rupee. what are the criterion that set the exchange rate?

Public Comments

1. It has to do with the macro economic conditions of trade between countries. The country who's ex-rate is wanting to be fixed justs buys and sells their own currency to keep the money supply constant in relation to the balance of trade - both with commercial goods and financial exchanges.
2. In simplest terms its an auction. A foreign company sells something in the US and receives dollars. They have to pay their workers and suppliers in the local currency so they put the dollars up for sale. How much local money will you give me for my dollars. Someone in that country wants to buy something in the US and needs dollars to pay for it and offers to exchange some amount local currency for the dollars. It's really not done on a company to company basis, it's done on a currency exchange but the principal is the same. Governments can control the the value of their currency by entering the auction and buying or selling to keep the exchange rate where the want it. Add in the fact that there many speculators betting on which way the rate will change.
3. you can check out the real time exchange rates here http://usd.exchangerates24.com/
4. There are 4 main things that effect exchange rates for an economic zone : Economic Data (interest rates, retail sales etc. Political Data (new government, new policies) Natural Disasters (Floods, Earthquakes) War (self explanatory!) These affect the percieved value of a currency, but essentially its just supply and demand. If an investor thinks the Eurozone is in trouble, they may move funds to USD to get a safer investment and better return. Thus, the Euro becomes weaker and the dollar becomes stronger. Trillions of dollars a day is traded in Forex.
5. I found a directory of US foreign currency exchanges. http://www.whatisforextrading.com Try calling one of them to see if they have a representative that can assist you.