The official foreign currencies exchange is established according to the priorities of the economic model of the country.The value adopted by the official foreign currencies exchange will be a key indicator to know in which direction the wind blows.
In Argentine, for example, during the 90’s and until 2002 the official foreign currencies exchange rate was fixed to one peso, one dollar. That means that for each peso issued by the monetary authority (Central Bank) there should be a dollar in the Public Treasury that supported it.
After 2002 the official foreign currencies exchange rate changed, after convertibility the peso was devalued and actually the official foreign currencies exchange rate moves between $3.20 per dollar.
In other Latinamerican countries the dollar value is not as high and the official foreign currencies exchange rate, for example, in Brazil is 1.83 reales per dollar.
In Venezuela, for example, official foreign currencies exchange rate is about 2250 bolivares per dollar, but the feature that this country has is that there is an spot market in which the official foreign currencies exchange rate quotes at 5500 bolivares.
In Latinamerican countries the official foreign currencies exchange is tied to the dollar standard as reference currency with which it can be calculated the value of commercial goods.

How do foreign currencies react in front of the changes of international markets? Bad luck is a constant at global markets, investors didn’t welcome the measure that some Central Banks took to inject liquidity and reduce the price of foreign currencies cost and beat the credit crisis.
Some days ago information about retail in the United States was known, and as it can be seen, they registered a raise of 1.2% in November, a good data according to expenditure that shows that the movement of foreign currencies is still a constant.
These news are about to support the decision that the Federal Reserve took of reducing in a quarter of point the interest rate that is paid for foreign currencies.
In front of this situation most of the markets closed with red numbers, Wall Street opened in negative, but in the end it succeeded as the titular of the mortgage Freddie Mac said that he had enought foreign currencies to finance their operations.

Maybe you don’t stay every day in front of a financial screen but you like being informed about the decisions that are taken at the Stock market. .
Being informed is a key point for those that spend their time investing foreign currencies. How does the fall of the interest rates of the Fed influence regarding foreign currencies investment?.
We should consider that high interest rates show that taking money is more expensive, while the reduction of these rates reduces the currency quotation.
After the decision taken by the president of the Fed, Ben Bernanke, of reducing the interest rate in a quarter until taking it to 4.25%, world foreign currencies reacted on the following way.
Foreign currencies investment turned up to be favorable for those that bet for the dollar as after the decision known yesterday the American currency increased slowly in front of the euro. Even thought the dollar falled against the Japanese yen.
On this way, who makes a foreign currency investment should know that the euro reduced its value to 0.3% in front of the American currency, until 1.4670 units. While the dollar falled to 0,7% against the Japanese yen, for some financial analysts American currency would have reactions in the next four weeks, and on the contrary we would confirm what many are asking, take interest rates to 3%.

What is happening in the world economy with the exchange rate dollar and euro? After the fall of the Asian markets in 1997, these have succeeded in recovery and actually they have a very important place in the world economic system.
The force that Asian markets have got, make them be an important element in the dollar and euro fight. Countries from the Middle East, above all China, have started an important commercial relationship with the United States.
China is the country that has more accumulated reserves in dollars, this maintenance and storage in dollars in the Middle East allow the United States tu continue importing products and services.
The problem of the Asians will get worse if in the exchange rate dollar and euro, the dollar continue losing. The United States buy dollars to other countries and those bills return borrowed to their economy by these countries while buying Exchequer bonds. The dollar system consists on having the dollar for free to the favored one (United States), as the interest rate that it will have to pay, and the capital borrowed for the bonds are returned with the benefit that have the United States in being the one that can issue currency having no other authority.
An uncontrolled dollars emission makes liquidity excess and the more dollars market supply we have, as it is happening today, the bigger the devaluation that this currency will suffer. Some days ago, the titular of the European Central Bank confirmed that the money cost (interest rate), in Europe it will continue being 4% , while in the Fed they are still discussing if they will reduce the interest rates, to improve the value difference that there is actually with the dollar and the euro, and so have the strong currency that we used to have some years ago.

Who establishes the value of the foreign currency? There are two actors that influence on the final quotation of the foreign currencies. The first one is the market law regulated by the supply and demand; and in second place the goverment politics that through the Central Bank set up the value of the foreign currency fixing it in front of the dollar, according to the economic model.
There are countries in Latinamerica where the value of the local foreign currency is devaluated in front of the dollar to help exports and generate the income of dollars through the sale of their products abroad.
These advantages that have the regional economies in Latinamerica are helped with the devaluation of the local currency and the increase of the value of the reference foreign currency, in this case the dollar.
Even if actually the value of the foreign currency is compared to the value of the dollar as reference currency, today the American currency has not the force that it used to have 50 years ago, and it can be said that slowly the dollar is getting into a one way tunnel.
The value of the foreign currency is based on the maintenance of the macroeconomic variables in orden an with superavit, so that income is greater than expenditure. Actually the United States have made the deficit a way of maintain many economies, especially the Asian ones. In incredible to think that Asian countries as Indonesia exports capital to United States instead of being the opposite, but this happens.
The United States have done that countries with commercial surplus invest their own saving in United States, becoming moneylenders of this country buying Exchequer bonds. The authorities of the Federal Reserve are sure that their commercial partners will always be forced to buy more American debt to avoid the definitive collapse of the foreign currency value and of the monetary global system.