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Currency exchange rates. Essence and concepts

Currency transactions, the implementation of which without prosecution from the law, became possible in the post-Soviet space only after the collapse of the USSR, should not be considered an extraordinary phenomenon that appeared in the last century. Money exchanges have been in demand since the invention of such. Another thing is that they were somewhat different in nature and scale, like the means themselves used in the exchange.

The development of information and computing technologies and the massive distribution of the web have made significant amendments to the process of implementing such a seemingly conservative activity. The exchange of various monetary units is gradually moving to the vastness of the virtual world, and in addition to title units, equivalents of different fiduciary monetary units, there have appeared varieties of digital or virtual money that do not have physical embodiment.

In the real world, the hallmark of any sovereign state is its own currency. As a rule, it is used in the process of mutual settlements on the territory of one country. Therefore, in China it is impossible to buy products for Russian rubles (or rather, it is possible, but it is unrealistically difficult, since a simple shop assistant does not understand Russian money) and you must first translate them and the yuan.

The exchange operation is carried out at the rate, which is defined as the ratio of two different currencies. So, one yuan is equal to ten rubles. Moreover, the exchange rate is not a stable value, and the value of one currency in relation to other currencies is constantly changing.

The essence of the conversion concept

To better understand the essence of a certain economic category, it is enough to familiarize yourself with the synonyms of this concept. So, the term conversion means nothing more than the exchange or purchase of one currency for the corresponding amount of ordinary or virtual money. Conversion can also be defined as converting one currency to another. Moreover, the cost of such an operation is determined by the financial market. So, the exchange rate of electronic money, that is, their price when buying and selling, is set by certain financial structures. You can get a good profit on the difference in these prices.

This type of activity is already consistently profitable for banking institutions and stationary currency exchange offices. In addition, there are many specialized resources on the Internet that deal with currency conversion. The so-called exchangers give everyone the opportunity to make an exchange in a variety of directions, including converting virtual money into fiat money. Most exchange resources independently set the rate of electronic money. Special attention should be paid to the Forex market, where various currencies are the main commodities. Speculation, as well as correct forecasting of the exchange rate, is the main type of income for traders.

Classification of currencies by their ability to convert

Depending on the ability of certain monetary units to exchange, a distinction is made between fully and partially convertible currencies. The first takes an active part in legal relations arising in the international market. In other words, it can be used to pay for the cost of goods or services outside the issuing state. Traditionally, there is an increased demand for such a currency all over the world. Then, as a partially convertible currency, not all countries accept as a means of payment. Accordingly, the exchange rate of such monetary units leaves much to be desired.

Virtual money helps strengthen a weakly convertible currency

It is quite obvious that in the international market, a more favorable position is occupied by countries whose currency has the status of freely convertible. In order for the cooperation of such states with economically weaker countries to be carried out on a parity basis, the latters currency must be converted into electronic means. This automatically puts the sides in an equal position in relation to each other. And the actual conversion process via the Internet takes a few minutes. Moreover, the exchange rate of electronic money makes this operation very beneficial for its participants.

After all, legal relations in which traditional means of payment take part, in a certain way affect the cryptocurrency system. In turn, virtual money also affects the financial systems of individual states. Therefore, the monetary units in circulation can be regarded as a kind of equivalent to traditional money. The advantage of electronic payment systems is the presence of a function that simplifies exchange operations. In addition, such services usually offer very profitable e-money rates.

What is the advantage of electronic exchange resources

The main advantage of electronic payment systems is the presence of its own currency converter. This allows you to carry out exchange operations almost instantly. To recalculate money in automatic mode, you just need to press a special button. The exchange amount is rounded to the nearest hundredth, which allows you to get the maximum benefit from the transaction.

In addition, the currency converter has a reverse calculation function. With its help, the user can see the final result even before the conversion begins. Thus, it is possible to visually verify the profitability of the exchange rate and exclude the slightest miscalculations in the transaction. Also, the electronic payment system is much less susceptible to outside influences than banking institutions.

Fiat currency, in any case, is controlled by the issuing state, which, thus, indirectly affects the exchange resource or the payment system. But this influence is minimized due to the freedom to determine the rate of virtual currencies. Their intrinsic value in different systems can differ significantly from each other. The main factor influencing the exchange rate of electronic money is the supply and demand ratio. Distinguish between optimal and average rates, the indicators of which are invariably reflected in the level of demand in the domestic market of a separate system.

How the course is determined

The value of electronic money in relation to traditional currencies depends on factors such as:

The official rate set by the banking institutions.
The nature of market relations that have developed on the electronic resource. This refers to the ratio of supply and demand for virtual money.
Just a few decades ago, the execution of exchange transactions was a rather laborious and lengthy procedure, and the rate of electronic money could not affect the existing system, since they did not yet exist in nature. But with the advent of the first cryptocurrency and the rapid development of electronic networks, the situation has changed dramatically. Modern users have access to convenient tools for converting and withdrawing electronic currencies. Moreover, their capabilities can be used both in private life and for running a large-scale business.