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Inflation is closely related to interest rates, which can influence exchange rates.Higher interest rates tend to attract foreign investment, which is likely to increase the demand for a country's currency.

A nation may choose to engage in full or partial currency substitution. Some countries may choose to replace their native money with the foreign funds entirely. In other cases, a nation might circulate common cash, but decide to use another country's currency in specific instances such as for international trade.

Exchange controls are government-imposed limitations on the purchase and/or sale of currencies. These controls allow countries to better stabilize their economies by limiting in-flows and out-flows of currency, which can create exchange rate volatility.

We outlined the 3 main methods used to adjust for inflation for studies in these settings: exchanging the local currency to US$ or international dollars and then inflating using US inflation rates (method 1); inflating the local currency using local inflation rates and then exchanging to US$ or international dollars (

Changes in market inflation have an impact on currency exchange rates. If a country's inflation rate is lower than that of another, its currency will increase in value. When inflation is low, the rate of increase in the price of goods and services is slower.

Easy monetary policy and high inflation are two of the leading causes of currency depreciation.Additionally, inflation can lead to higher input costs for exports, which then makes a nation's exports less competitive in the global markets. This will widen the trade deficit and cause the currency to depreciate.

An adjustment is the use of mechanisms by a central bank to influence a home currency's exchange rate. An adjustment is specifically made if the exchange rate is not pegged to another currency, meaning that the currency is valued according to a floating exchange rate.