THE VALUE OF MONEY
Recently, we came across articles in newspaper concerning our neighbor countries, one is Afghanistan and the other being Srilanka . Both the countries seem to be struggling with a gripping issue, for which the reasons are different, but effects are same. The currencies of these countries plunged, in response to Taliban takeover in Afghanistan and the drying up of forex reserves in Srilanka. You might be wondering how our currencies get their value, who decides the value of goods and services I am entitles to the money I Pay, though there are many factors like central bank interest rates and business regulations of the particular country, the amount of foreign exchange reserve play a key role.
In recent times, India’s foreign exchange reserves touched a record high, but very few understood its importance. Increasing forex reserves means, access to dollars at cheaper rate. Almost all countries, barring few facing US sanctions transact in US Dollars for their imports and exports.
Countries receive and spend dollars in many ways, like through imports and exports, arrival of tourists, students from abroad etc.,. Many South East Asian countries depend on tourism as their primary source of forex exchange as they do not have natural resources for businesses to be established and grown.
One more important way of receiving forex funding is in the form of investments. I will like to understand these two things together, Indian markets are at an all time high at the same time, forex reserves are at a high, meaning India continues to attract currencies than many other countries and rightly so, markets are at all time high
- Global pandemic situation, favorable interest rates and favorable business cycle can be suggested as reasons.In Srilanka, forex flows have dried up due to pandemic and exports were also stopped. This forced the country to pay more of their currency, the srilankan rupee to get us dollars in the money market. Since the supply of their currency became rare, price of commodities rose in Srilanka, leading to inflation like scenario in the island country dollar appreciated considerably compared to srilankan currency.Common people can learn valuable lessons from this economic behavior:
external forces can cause the value of our currency to swing and saving may not help in the long run. It is time we started looking beyond savings to investments to manage more returns out of our money.
Investment trends have been changing across the world as startups are emerging as new investment destinations. Big corporates who wish to profit out of them are investing both financially and strategically in a startups with a solid plan and newer technological offering, the point is that, these institutions are changing their investment approach, to align largely with technological advancement rather than capital expenditure. For those familiar with equities markets, infoedge and just dial may be cited as examples. We must therefore seek to invest our funds more diligently. Through this method we van put our money to better use.
Happy learning, Happy trading!