A country’s currency exchange rates with other countries’ currencies move to equal the demand with the supply. In a simple analogy, the price of oranges changes to match the demand and supply of oranges. Each time someone sells a local currency for foreign currency, it creates a demand for foreign currency and a supply of local currency. Contrarywise, if someone buys a local currency using a foreign currency, it creates a demand for that local currency and supply of the foreign currency used in buying. In summary, if the total demand for local currency and the supply of foreign currency equal the total supply of local currency and demand for foreign currency, the country’s balance of payments will be stable. If this happens, there will be no reason for its exchange rates to rise and fall, thus it will become consistent.
However, if the supply of local currency surpasses the demand for it, or in other words, if the balance of payments becomes deficit, its exchange rate will depreciate or fall. This will then increase the price of foreign currency. This will continue until the balance of payments is in balance again. Conversely, if the demand for local currency surpassed its supply, or in other words, if the balance of payments becomes surplus, its exchange rate will appreciate or rise, and will continue to do so until the balance of payments becomes balance again. Foreign exchange markets are very centralized and have computers set to automatically buy and sell currencies, thus such currency imbalances are short-lived. But why do foreign exchange markets do this?
Foreign exchange markets control the balance of payments in the supply and demand of currencies in their attempt to control capital movements in and out of the country for investment purposes. It could be for a long-term investment, such as building or acquiring an asset located in a foreign country. Or it could also be for a short-term investment such as the speculative movement of money to a country. But these speculative investments are highly controlled and prevented by exchange controls so that they can better manage long-term investments. In short, a country’s overall balance of payments, not to mention the intervention of its central bank, is simply established by the level of its imports and exports. As long as a country’s imports and exports are balanced, the balance of payment remains balanced too, which keeps the country’s exchange rates consistent.
A better way to keep the balance of supply and demand, which will establish exchange rates, is through a free-market exchange. In a free-market exchange, no one controls the level of supply and demand. This means that anyone is free to exchange local currencies to foreign currencies, regardless of the type of currency as they can exchange not only fiat currencies such as the USD, Yen, Yuan, Pounds, etc. but also digital currencies such as bitcoin, Ethereum, Litecoin, etc. If the level of supply and demand is constant, the exchange rates between currencies will be constant too. This is what happens to Virie Market, a decentralized distributed exchange network, which is not controlled by any bank. In fact, it is not controlled by any entity at all.
Virie Market promises the right balance in the supply and demand of currencies, which means that it can withstand inflationary pressures. Anyone is free to exchange any type of currencies they want, fiat or digital, including its native currency, Virie. You can trade on the Virie Market using any currency (Dollars, Yen, Pounds, Euros, Bitcoins, Virie native coins, etc.). You can exchange not only money for money, but Virie Market also allows you to trade GOODS and SERVICES. You can directly exchange anything you like for anything you want in just a few clicks because it has the most user-friendly interface in the market today. Download it here and see for yourself.