Currency

The value of money differs from country to country and the money that is in circulation within different nations are labelled as the currency of that place. In simplest words, coins and banknotes used as a medium of exchange in a specific country is that country’s currency. Currencies are defined by governments and are traded between countries through foreign exchange markets. This in term determines the value of that currency.

It has to be noted that not all currency is fully convertible. Currencies that are fully convertible have no restrictions on how much can be traded for on an international scale. The government doesn’t set any fixed or minimum value on these currencies and the US dollar is a valid example of this, as it is one of the major currencies traded globally; finding its way constantly into the foreign exchange market. Some currencies are controlled by the central banks with regards to international investments. Such type of currency trading requires approval to be converted into other country’s currency, for instance the example of the Indian rupee and the Renminbi can be considered a valid example of a partially convertible currency. Some currencies are not allowed to be traded within the international FOREX market, for instance the North Korean Won and the Cuban Peso.The degree to which one currency affects another currency can be studied through their interrelations with one another. A key determinant of the INR value, is the US dollar.

The United Nations recognizes around 180 currencies as legal tender. While each country has a currency specific to its local market, it has to be noted that the most common currencies used worldwide for international trading consist of the US dollar, the Canadian dollar, the euro, the Japanese yen, the British pound & the swiss franc.

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