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A large proportion of short-term trade in currencies is by dealers who work for financial institutions. The equilibrium exchange rate is the rate which equates demand and supply for a particular currency against another currency. If we assume the UK and France both produce goods that the other wants, they will wish to trade with each other. However, French producers require payment in Euros and the British producers require payments in pounds Sterling. Both need payment in their own local currency so that they can pay their own production costs in their local currency.
The foreign exchange market enables both French and British producers to exchange currencies so that trades can take place. The market will create an equilibrium exchange rate for each currency, which will exist where demand and supply of currencies equates.
Changes in the value of a currency like Sterling reflect changes in demand and supply. For example, an increase in exports would shift the demand curve for Sterling to the right and push up the exchange rate. Conversely, lower interest rates in one country relative to other countries leads to an increase in supply, as speculators sell a currency in order to buy currencies associated with rising interest rates. April saw Kanoo Travel branch out into the UK travel industry, after acquiring American Express' High Street leisure travel and Foreign Exchange businesses, in a franchise agreement which combines the service and brand values you would expect from 2 of the largest travel companies in the world.
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