Banking organizations provide theirclients a number of services, among which one of the main places is allocated to operations with different currencies. Thus, in banks in the territory of the Russian Federation, it is possible to exchange Russian rubles for other monetary units. In addition, other transactions involving different currencies are also available. As an example of the service provided by most commercial banks in the Russian Federation, one can call conversion of various currencies. What is currency conversion?
Financial organizations in the Russian Federationtake an active part in the domestic and international currency markets. This gives them the opportunity to offer their clients services for the implementation of transactions related to the money. To the category of this kind of services is the conversion of currencies, which is a procedure for the exchange of one foreign currency unit for another.
The easiest way to explain what currency conversion isin a clear example. Suppose a client of a commercial bank has a certain amount in US dollars on his hands. It must be exchanged for British pounds sterling. In order not to sell dollars for Russian rubles with the subsequent acquisition of British pounds, the bank's client can immediately make an exchange of US dollars to the British currency. This is the conversion of currencies.
What is currency conversion in Russia?The Central Bank of the Russian Federation does not regulate the procedure for determining the quotations of one foreign currency for another currency. Therefore, commercial banks for the implementation of such transactions establishes its internal rate, which is called the conversion rate. As a guideline for setting this value, the current market rate is used. As a rule, its value is close to the quotations of currency pairs on the interbank market. Thus, for example, a conversion rate is established for transactions with the currency in Petrocommerce.
In addition, many banks to implementsuch transactions introduce the so-called cross-rate. In this way, the rate of a foreign currency unit relative to another is established through a third currency. By the way, it will be noted that some financial institutions in this capacity use the Russian ruble, while others - the US dollar.
Practically in any commercial bank physicalindividuals have the opportunity to convert such major foreign currencies as the US dollar and the euro. Some banking organizations generally only work with this currency pair. Therefore, if necessary, a conversion with other currency units will take some time to find a suitable bank.
It should be emphasized that the selection of the best courseConversion of the dollar or the euro is not an easy task. This is due to the ability of various banking organizations to establish their own quotes. At the same time, such a process can rely on data on rates from the interbank exchange or on the current exchange rate of the Russian ruble. It should also be borne in mind that quotes for one day can change periodically. What is the conversion, figured out. And what facts affect the courses and quotes?
For the currency market, anythe state is, first of all, the exchange commodity. Consequently, the same laws apply to it. For example, the rule of supply and demand. The ratio of these indicators determines the rate of a particular monetary unit and, accordingly, the rate of conversion. In addition, it should be emphasized that the exchange rate is a volatile and directly dependent on the economic policy pursued by the issuing state inside and outside the country.
The main factors that influencethe rate of the national monetary unit, are the external trade balance of the country issuing the currency, the political, economic and financial situation in the state, as well as the policy of the regulator, that is, the Central Bank. Consider these three circumstances in more detail.
With the increase in exports of goods and services from the countrythe monetary unit of this state is strengthened. This is due to the fact that there is an excess of foreign currency. Consequently, the demand for a national currency increases. With the ratio of exports to imports approaching zero, that is, the balance of the trade balance, the national currency takes a stable position, and its course is easily predictable.
Great value for quotations of nationalcurrency has a political and economic situation in the country. As far as we know, the main macroeconomic parameters include the level of inflation, unemployment, gross domestic product, and GDP per capita. These indicators are indicative of the current economic situation in the country. For example, a high unemployment rate and an increase in inflation have a negative impact on the exchange rate of the national currency. At the same time, the growth of gross domestic product helps to strengthen the monetary unit.
The central bank of any state isthe main regulator in the financial sector of the country. In addition, according to the constitution of most states, maintaining the national currency in a stable position, strengthening it is the main function of the regulator. And to achieve this, the Central Bank can use a variety of tools and mechanisms.
