The role of currency conversion in world trade

Numerous summits and legislations paved the way to success in achieving global trade. It inter-connects both the developing and developed nations to work together. This unity bought them the global adherence. The trade ethics approves the international integrity in the trade. The global market needs friendly and timely transactions. Literally the trade denotes both exports and imports. Both this process needs money transactions. This transaction between two different currencies needs a common convertibility criterion. Thus, the convertibility is a necessity here.

Various convertibility criteria

The convertibility process includes recognition of currency’s place in world trade. The currency should have international importance and global need. The basic theme in conversion of a currency is reliability among nations. Each nation follows a unique money market. Few examples are UK Pound, US Dollar, Indian Rupee, EU’s Euro and Iraqi Dinar. The currency’s place in global money basket should be taken in account. The place in money basket depends on the international need and trade. A currency to be converted should hold an ideal place in the balance of payment.

An investment option

Few approach the converting firms to convert and hold their currency in the form of most demanding currency. This enables them to get a good proportion of profit. Thus, the convertibility can be used as an investment option. This provides the people a way to invest in a promising return. Investment in other business options may go wrong, but the investment in convertible money market provides surety to the investment. The investor can stay free from the risk of returns. The rise in the value of a currency in the global market will credit the investor. Thus, the appreciation of a currency is favorable throughout the global money market. In turn, the depreciation of a currency will bring down the value of a currency.

Convertibility creates a unique code among the nations in the world market. The nation with a stable place in the economy occupies the superior hold in money market. These nations are hence considered as the developed ones. The currencies gaining strength in the world market are considered to have the developing trend. Even though the developing and developed economies float in the same sphere, it holds separate track in the economy. The convertibility acts as a link among those individual tracks. That’s why the term convertibility here implies the meaning as comfort ability. The currency with appreciating trend in the global market is favored to gather a huge attention towards it. This indirectly attracts more trade offers. That’s how a developed economy occupies the superior position in trade. This makes the stable economy, to have a big share in deciding the trade formulae. The dominant role in trade will be automatically taken by the stable economy. The convertibility option can change the whole economic sphere with ease and comfort. This makes the trade accessible to every nation irrespective of their status in the economy. The changing trend across the globe habitually leads to changing trade assistance. This gives a chance to every nation in proving their ability in money market.