What Causes An Appreciation In The Exchange Rate

An appreciation in the Exchange rate can occur for various reasons. The most significant reasons include higher interest rates and lower inflation. An appreciation of the exchange rate can have a significant impact on a country's economic growth and inflation therefore it is important to understand what can cause an appreciation in the exchange rate.

1. Higher interest rates. If interest rates rise then it makes it more attractive to save money in UK banks and UK financial securities like bonds. Therefore this causes increased demand for sterling to deposit money in the UK. This is called "hot money flows" The higher demand for sterling causes an appreciation of the exchange rate. It is a significant factor because of the high volume of foreign exchange which is transferred between countries to take advantage of differences in interest rates.

2. Inflation Rates. If inflation in the UK is lower than elsewhere then it makes UK goods relatively more attractive. Therefore there is an increase in demand for UK exports and therefore higher demand for sterling this will cause an appreciation. This is a significant factor in the long term.

What Causes An Appreciation In The Exchange Rate

3. Speculation. A lot of exchange rate movements are due to speculation. If people think an exchange rate may increase in the future then they will buy now to try and make profit. Therefore this speculative buying causes significant fluctuations in the exchange rate. The attitude of foreign currency dealers to an economy is very important for determining the exchange rate.

4. Increase in competitiveness. This is related to lower inflation. If a country becomes more competitive because of increased labour productivity then there will be more demand for UK goods and the exchange rate.

5. Current Account Surplus. This means the value of imports (of goods and services) is less than the value of exports. Therefore more foreign currency is coming into the country than going out. (although it may be offset by a surplus on financial / capital account.

What Causes An Appreciation In The Exchange Rate
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View More: Economics Essays

Richard Pettinger studied Politics and Economics at Lady Margaret Hall, Oxford University. He now works as an economics teacher in Oxford. He enjoys writing essays on Economic and he edits a site - Economic Help which includes a blog about latest developments in Economics http://www.economicshelp.org/econ.html

Top Causes of Homelessness in America

As many as 3.5 million Americans are homeless each year. Of these, more than 1 million are children and on any given night, more than 300,000 children are homeless.

While the general impression is that the homeless are primarily the chronic and episodic, those unfortunate individuals often seen living on the streets in the downtown areas of our cities, the fact is that more than half the homeless are families with children. The vast majority of these have been thrust into homelessness by a life altering event or series of events that were unexpected and unplanned for. Contrary to the belief that homelessness is primarily the result of major traumatic events or physical and mental disabilities, there are many top causes of homelessness in America.

Economics

Homelessness is, in fact, caused by tragic life occurrences like the loss of loved ones, job loss, domestic violence, divorce and family disputes. Other impairments such as depression, untreated mental illness, post traumatic stress disorder, and physical disabilities are also responsible for a large portion of the homeless. Many factors push people into living on the street. Acknowledging these can help facilitate the end of homelessness in America.

Top Causes of Homelessness in America

For those living in poverty or close to the poverty line, an "everyday" life issue that may be manageable for individuals with a higher income can be the final factor in placing them on the street. A broken down vehicle, a lack of vehicle insurance, or even unpaid tickets might be just enough to render someone homeless.

Divorce costs and the associated lowering of a family's total income can cause one or more family members to become homeless. For families that can hardly pay their bills, a serious illness or disabling accident may deplete their funds and push them out onto the street. Today, the rapid, unexpected loss of jobs and resultant foreclosures has caused great dislocation among families and has dramatically added to the number of people without a roof over their heads.

Natural disasters often cause current housing situations to become untenable and costly repairs are often simply not possible. The results of Hurricane Katrina stand in bleak testimony to the power of nature to displace people.

The great challenge for the newly homeless is to figure out how to return to their normal lives. Organizations that build emergency shelters and transitional housing typically work with a larger number of service providers around the country whose mission is to provide the services, such as job training, social skills training, and financial training, that enable these people to regain employment and return to mainstream lives. The progression for these recently homeless is to first be housed in transitional residences where they can learn these skills, to graduate to assisted living in affordable housing while they build up economic reserves and rebuild their employment resume, and then to graduate to full, market rate housing.

Many of these service provider partners are household names, such as Volunteers of America, Rescue Missions, and the Salvation Army. Many others are local organizations formed to address specific homelessness issues in the community. By carefully vetting the qualifications and financial stability of these service providers, organizations that build emergency shelters and transitional housing are able to assure that their facilities are effectively utilized in the fight to end homelessness.

Top Causes of Homelessness in America

About HomeAid
HomeAid is a leading national non-profit organization that builds and renovates multi-unit shelters for America's temporarily homeless families and individuals while they rebuild their lives. HomeAid has built more than 200 multi-unit shelters with an additional 37 in development. These shelters provide more than 1,800,000 bed nights annually nationwide. To learn how you can help the temporarily homeless, please visit: http://www.homeaid.org.

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