Currency, which can be defined as the currencies of foreign countries and used in international trade transactions, is one of the most preferred investment tools today by both large and small investors. In this article, we will briefly touch on the exchange rate, which is one of the concepts that is frequently heard around, and how investors make a profit from foreign currency, especially as the currencies of foreign countries gain and lose their value compared to the Turkish lira.

What is the Exchange Rate?

The concept of exchange rate refers to the coefficient that determines the value of a country's currency against other countries' currencies. The price applied to the purchase of foreign currencies is called the buying rate, and the price applied to the sale is called the selling rate. The prominent factors affecting exchange rates; The economic situation of the countries can be counted as political developments and the policies carried out by the central banks. Like every good that can be bought and sold, the prices of currencies in the market are determined according to supply and demand. Therefore, if the foreign currency is high in a country, the exchange rate will be low, and if it is less, it will be high.

Flexible Market Exchange Rate: It is a flexible system in which the Central Bank allows the exchange rate to fluctuate freely before intervening in the market.

Fixed Exchange Rate System: It is the system in which the Central Bank intervenes in the markets and keeps the exchange rate in balance.

Controlled Exchange Rate System: It is the system that the Central Bank aims to control the fluctuations in exchange rates.

Now, we'll briefly dive into a few popular and important terms that you might come across if you're more interested in the topic:

Devaluation - a state intervention in the country's economy, is the devaluation of a country's currency against other countries' currencies.

Revaluation - The opposite of devaluation, that is, the appreciation of the country's currency against other currencies.

Cross Rate - It can be defined as calculating the exchange rate between different currencies.

Real Exchange Rate - Also known as the "terms of trade", the real exchange rate refers to the purchasing power of a country's currency against a foreign currency.

Floating Rate - The exchange rate that can fluctuate according to market conditions.

How to Invest in Foreign Currency?

As we mentioned at the beginning of the article, foreign exchange is a frequently preferred investment method and is seen by many as an effective way to make use of their savings. Investors basically follow the exchange rates and aim to profit from the differences between these exchange rates. In other words, it is possible to make a short or long term profit by buying a currency that will increase in value against the currency of your country and by selling this currency when it is valued. At this point, it is worth noting that currencies change rapidly compared to many other investment instruments. Therefore, before investing, you should know the market well and be able to understand how price movements can change depending on what factors.

These types of investments can be realized in more than one way. In the past, exchange offices were frequently preferred in this regard. Today, the deposit accounts of banks and especially the Forex market are more preferred by investors who are considering investing in foreign currency.

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You can finish the course whenever and wherever you want, with the advantage of stopping where you want and continuing wherever you want.

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