Money transfer companies worldwide offer the same basic service of transferring money online to different parts of the world by using the basic techniques but with slight differences. One of the big differences between these companies is the differing exchange rates these companies have on offer. This difference is based on a range of factors which this article intends to throw light on. But, before we discuss those factors, we should be aware that the exchange rates are either fixed or floating and can affect your remittance if, for example, you wish to complete a money transfer to Philippines.
Floating Exchange Rates:- Floating exchange rates are determined primarily by basic and simple demand and supply rules in an open market. If the demand is high, the value will increase, whereas the low demand will pull the value down. This is one of the factors owing to which different companies offer different rates.
There are, of course, innumerable factors that can keep a currency’s exchange rates fluctuating but some of the most common yet with deep impacts are interest rate changes; unemployment rate; inflation; Gross Domestic Product; manufacturing data and commodities etc.
Now, let’s take a look at the fixed exchange rate and its determinants.
Fixed Exchange Rates:- A fixed or pegged rate is determined by a government through its central bank, which is better understood in business circles as a central financial regulatory authority of a country. This financial regulatory authority, in consultation with the government, and after taking several national and international factors, sets the rate against another major currency in the world such as the US dollar or the UK pound sterling.
Even rumours, disasters and false news can have a deep impact on the currency exchange rates. A currency is bound to fall if its supply exceeds its demand and it will rise only if its demand exceeds its supply. Central banks or the main financial regulatory authorities may deem it appropriate to intervene if a currency takes a drastic and sudden dip or jumps up out of nowhere even in the free market driven by supply and demand.
In the world of international trade, the price of one commodity should equal the price in the other. It is called Purchasing Price Parity (PPP). A change in these prices will affect the interest rates or the exchange rate between the countries.
Another factor that determines the fluctuation in the exchange rate is the geostrategic circumstances of a region or a country for that matter. If in a country, a government is unstable the exchange rate will fluctuate more than in a country where a government is stable.
Conclusion:- From all the above discussion, we can safely conclude that it is not the companies that keep exchange rates different from each other and fluctuating but the national and international factors, some of which have been deliberated upon at length. ACE is one of the few companies which keeps its exchange rates stable as much as it possibly can in order to convenience its loyal and ever-expanding customer base.
Do you know you can send money to Philippines at reasonable exchange rate using ACE Money Transfer?