Foreign Currency Conversion Unfair: Have this come across your mind?

@ru88en (2997)
Philippines
December 16, 2006 5:42pm CST
Why is my money worth little in the foreign land? Who control the conversion rates? What are the basis for conversion exchange? Do you find it unfair? My country has a currency conversion of 49 to 1 against the dollar.
5 responses
• United States
17 Dec 06
I have no idea how economics works, it has always been a mystery to me! But I agree with you. I am in the U.S. I took a trip to a European country once (wish I could do it more often... or move there!!) and it was painfully expensive. There are sometimes things I need to buy online from Europe, and again, paying in Euros really hurts the wallet; the dollar keeps dropping against the Euro. Then again, I guess it's nice for Europeans - they come here to the U.S. now to get a bargain! And I've been to a couple of coutries where the currency was valued low against the dollar, and thus it was nice to feel wealthy for a change... :) I may be completely wrong, but I don't think anyone controls this directly... I believe it simply has something to do with imports, exports, all that sort of mysterious stuff. And it definitely seems unfair for those who live in countries with extremely low-value currency...
1 person likes this
@SplitZip (1490)
• Portugal
17 Dec 06
Economy IS mysterious. And incredibly complex to folks like us who aren't in the know. But some countries do manipulate the value of their currency, I believe China has been doing this to keep its economy more competitive and the IMF(?) was giving them some trouble about this? If you want to read a mindblowing article (about how economy seems to hang from a thread), read this: http://www.straightdope.com/classics/a3_163.html
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@ru88en (2997)
• Philippines
17 Dec 06
The scenario is that it is best to earn income from a country with higher currency value and spend the money to the country with low currency value. I hope I am right with this.
• United States
18 Dec 06
Splitzip thanks for the interesting link! ru88en that is quite right; I know a couple of people who work 6 months of the year in the U.S. then live and spend the other 6 months of the year in Russia, it works out quite well for them financially.
@BunGirl (2639)
• United States
17 Dec 06
Currency conversions are based on the economies of the currencies involved. If you go to a place whose economy is stronger than your own your money will be worth less. If you go to a place where the economy is weaker, your money will be worth more.
1 person likes this
• United States
18 Dec 06
that is clear but it doesn't explain what makes the economy stronger in the one place and weaker in the other place. actually, it doesn't even define what 'stronger' and 'weaker' mean in this sense.
@SplitZip (1490)
• Portugal
19 Dec 06
The link up there explains most of it :)
@SplitZip (1490)
• Portugal
16 Dec 06
At least it's good for exports? Ever since we got the euro, individual countries have no way of controlling the currency. Because the euro is higher than the dollar, some industries complain that it's hurting their exports. On the other hand, it's good for people like me, who import things from countries like the US. "What determines how much a dollar (or the yen) is worth? That depends on how many people, actually having yen, would rather have dollars, and on how many people, actually having dollars, wish they had Yen. This is an example of the basic economic concepts of Supply and Demand." From: http://mcel.pacificu.edu/mcel/projects/fcx//fcx2.html Other sources: http://www.straightdope.com/mailbag/mexchangerates.html http://money.howstuffworks.com/currency.htm http://en.wikipedia.org/wiki/Category:Currency http://en.wikipedia.org/wiki/Exchange_rate
1 person likes this
@ru88en (2997)
• Philippines
17 Dec 06
Your answer make sense to me. Just one question. If there is one to be called a universal currency today then that is a dollar. I hope you agree. Being a universal currency position the dollar to be very much in demand. My question is how come some countries have a higher value that the dollar? I hope, you can drop by again to this topic...
@SplitZip (1490)
• Portugal
19 Dec 06
Check the first link I posted, it's exactly about currencies that are worth more than the dollar, but they're from countries with (arguably) weaker economies than the US. It seems confusing doesn't it? But more factors other than supply/demand also interfere with the currency exchange rates. To summarize: "There is no necessary relationship between the exchange rate of a foreign currency relative to the U.S. dollar and the strength of the issuing country's economy or its wealth. Consider a few examples. Some of the strongest currencies other than the U.S. dollar (that is, ones preferred by investors, because their value is stable) are the British pound (at 0.63 per dollar), the Japanese yen (at 116 per dollar), the Swiss franc (at 1.40 per dollar), and the European euro (at 0.90 per dollar). The yen is a particularly striking case. Although the Japanese have had their problems in recent years, they still have one of the largest economies in the world and are wealthy by any standard. Yet one yen is worth less than a penny. (...) Another way to think about currency exchange rates is that they're like stock prices. The fact that one company's stock price is higher or lower than another's doesn't necessarily tell you anything about which company is stronger or the better investment. You decide that based on the movement of the price over time." That article is a long read, but if you want to know a bit more about this subject, it clears up a few things :)
• Philippines
28 Dec 06
yes, its really unfair to us that exchange of currency... thats why most of the filipinos are finding job overseas because of poverty and our money was too small to help their families not like the other countries..
@sunita64 (6470)
• India
25 Dec 06
Well this conversion business even I do not understand, because when we buy a foreign equipment for our lab it is very costly as compared to our currency. But when we are paid by mylot then it looks good that $ has a higher value.So when paying for something it looks unfair while receiving it looks fair.