Understanding Why Currency Exchange Rates Fluctuate

There is no truer statement in the foreign exchange market than; yesterday’s price is not today’s price. What then determines the price of a dollar to naira today? Have you ever wondered why the exchange rate between NGN and other currencies seems to constantly be on the move? Every Nigerian trader’s question is how much is a dollar to naira today? 

This article explores the reason for this constant change in the foreign exchange market.

1. High Demand, Strong Currency: If there’s a strong demand for a particular currency, its value appreciates (increases) relative to other currencies. Think of it like the price of ram during the period of Ramadan celebration or the price of Chicken every Christmas festive season – the more people want it, the more expensive it becomes. Currency demand can be driven by several factors; economic strength, political stability, and attractive interest rates.
2. Low Demand, Weak Currency: On the flip side, if there’s a low demand for a currency, its value will depreciate (decrease) relative to other currencies. This can happen due to; economic woes, political unrest, and rising inflation. 

While supply and demand are the main drivers, other factors can influence exchange rates:

• Global Trade: The flow of international trade can impact exchange rates. When a country exports more than it imports, there’s a higher demand for its currency to pay for those exports.
• Central Bank Intervention: Central banks can influence exchange rates by buying or selling their currency in the market or by implementing certain policies to attract foreign currencies into the country thereby increasing the value of its local currency. 
• Currency Speculators: Currency traders can also influence exchange rates by buying and selling currencies based on their predictions of future movements in large quantities. 

Today’s Exchange Rate: How Much is Dollar to Naira Today? The exchange rate between the USD and the NGN can be quite volatile. To find the most current and competitive exchange rate, check out our Instagram page here or chat via WhatsApp here. You can also visit our office at 38b Adebayo Doherty Road, Lekki Phase 1, Lagos for safe and reliable foreign exchange transactions