How foreign currency enters into the country?

No doubt, it’s an age of globalization that has blurred the boundaries between countries. Trade among countries has achieved a crucial status in the economic world that no country can survive in a vacuum. One of the most common exchanges between countries is the exchange of currency through various ways that impact the economy of each country involved in the exchange activity. A foreign currency enters the country in both formal and informal ways. Mostly, foreign currency conversions or exchanges are catered by financial institutions like banks and foreign exchange companies. Two of the greatest means through which foreign currencies enter into the local economy of a country are remittances and through trade.

  • Remittances are sent by foreign workers who work out of their home countries. These funds are sent to the families of workers in order to support them financially. The foreign currency is then converted into local currency. Remittance plays a huge role in the economy. it shares a magnificent part of the gross domestic product by contributing directly and indirectly to the economy.
  • Foreign investment is also another way through which foreign currencies are introduced into the local financial sector. The exchange of trade and investments helps countries to increase their foreign reserves. Global trade is playing a vital role in boosting economies. Foreign currency reserves help countries to exchange their surpluses to boost their economies.

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