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Hedging strategies can protect a foreign investment from currency risk for when the funds are converted back into the investor's home currency. Currency ETFs can be used to mitigate a portfolio's exposure to the performance of a currency exchange rate.

9 Factors That Influence Currency Exchange Rates Inflation. Inflation is the relative purchasing power of a currency compared to other currencies.Interest Rates.Public Debt.Political Stability.Economic Health.Balance of Trade.Current Account Deficit.Confidence/ Speculation.

There are a handful of methods that can solve a currency crisis, including implementing floating exchange rates, moving away from pegged rates, monetary policy that allows for trading with the market, government policies to attract foreign investment, and the country purchasing its own currency.

When an exchange rate changes, the value of one currency will go up while the value of the other currency will go down. When the value of a currency increases, it is said to have appreciated. On the other hand, when the value of a currency decreases, it is said to have depreciated.

Exchange rates are constantly moving, based on supply and demand. Whether one currency is in higher demand than another, depends on the perceived value of owning it, either to pay for goods and services, or as an investment.

Debit cards and electronic transfers are replacing physical money, leading to a system where governments, banks, businesses, and people transfer funds by having a third party change numbers on the equivalent of an electronic ledger.

In general, a weaker currency makes imports more expensive, while stimulating exports by making them cheaper for overseas customers to buy. A weak or strong currency can contribute to a nation's trade deficit or trade surplus over time.