An analysis of the determinants of exchange rate and their impact on international trade

Changes in exchange rates have a big impact on international trade and the economy because they affect how competitive countries are and how much goods and services are imported and exported. There are numerous causes, including market speculation and macroeconomic factors. The goal of the study is to examine the main factors—GDP, inflation, and interest rates—and determine how they relate to changes in the exchange rate. It goes into additional detail about how these changes affect the prices, profit margins, and investment decisions of businesses engaged in cross-border commerce. Exchange rate volatility and its link to determinants and international commerce as a predictor of trade performance are examined in the research using statistical methods, correlation matrices, time series analysis, data visualisation, and tools like pandas, line graphs, and Python. In order to get useful results, we will be evaluating data for this project from 2010 to 2023. The findings of this study will be a helpful resource for academics investigating the broader economic effects of exchange rate volatility. The study also ends with suggestions for reducing currency volatility risk that will help to foster a steady and predictable trading environment.