What is the Impact of Inflation on Currency Exchange Rates?

Inflation and currency exchange rates are interconnected. Inflation directly impacts the currency exchange rates. 

What is Inflation?

Inflation refers to the increase in the prices of goods and services over a given period of time. 

Understanding Currency Exchange Rates 

Currency Exchange Rate is a rate at which one currency is exchanged for another. For eg- INR 82.84 paid to buy 1 USD. 

How Inflation impacts Currency Exchange Rates?

Inflation negatively impacts currency exchange rates. Due to high inflation, the currency value of the country goes down. due to low buying power.

 There will be more expensive international money transfers which makes it harder to send money to your home country. This will influence the local currency.

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