International trade will give the international consequences of the transactions related to international payments. Means of payment in international transactions using foreign currency or foreign currency. International transactions will affect a country’s balance of payments equilibrium.
International trade encourages countries to create a payment tool that can be accepted by many countries. Upon mutual agreement, international means of payment in the form of foreign exchange that can be cashed in foreign currency.
Foreign exchange rates
Every country has a currency that is different. This difference drives the need for exchange rates or exchange rates. This shows the nominal exchange rate of the domestic currency against foreign currencies in a single unit. However, in the foreign exchange rates you’ll see the difference between the selling rate and buying rate value. The value of foreign exchange rates have an important role in the smooth traffic of international payments. Foreign exchange rates facilitate the exchange of currencies and transfer funds from one country to another country. A foreign currency exchange rate will be amended from time to time. In general, to determine high or low foreign exchange rates consist of free exchange, fixed exchange rate, and exchange rate stabilized.
Factors that cause changes in currency values
Some important factors that influence changes in foreign exchange rates, among others:
a. Changes in prices of export goods
b. Inflation (rise in general prices)
c. Changes in interest rates and return on investment
d. Changes in public taste
e. Noneconomic factors.