subject: Exchange Rate Comparison [print this page] The best way of exchange rate comparison is to shop around and find out the best rate available. Forex rates are dynamic in nature. You might rather wait for the rate to drop if it is too high and when the rates begin to fall, you might prefer buying.
GDP-GDI
The major contributor to foreign exchange comparison is the gross domestic product and income (GDP and GDI). GDP is based on the location, and is confined to a particular country while GDI is based on ownership and primarily is in the hands of citizens of that country. Income-output, expenditure-output and product-output are three ways of determining GDP. A particular countrys economic-output is measured by GDP and GDI. GDP and GDI are measured consistently and frequently, and are widely used.
Comparison Across Borders
GDP is compared globally, after the values are converted into local (national) currency. This conversion is based on either current forex rate or purchasing-power-parity (PPP) forex-rate. PPP refers to the purchasing power of a particular economy. PPP forex-rate is determined based on currency comparison to a standard, such as USD.
Ex-Rates Comparison
Comparing rates on a global platform indicates a better picture about purchasing power of a particular country. It also depicts the economic power of a country. Exchange rate comparison is determined by the global forex-rates, based on which the value of a countrys services and goods are converted.
From a day-to-day market perspective, all the institutions that provide services for forex and international travel, buy currencies at a particular rate and sell them at a different rate. Thus, they earn a large margin of profit through their buyers. Since forex rate are not the same all the time, and change every second, it is difficult to foresee and do foreign exchange comparison to get the best rate. This is mainly because there are various factors that contribute towards the fluctuation.
by: Devid Anderson
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