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What moves the currency rates?

A lot of reasons can have their hands behind the fluctuating market and currency rates, and not one or two can be blamed for any sort of rise or fall in them. Although it would not be entirely wrong to say that the Forex market business is more or less based on these fluctuations only. Traders trade in this market, purchase and sell various currencies with the expectation of making gains if the value of the exchange moves in their favor. Now this sudden movement in the market can be caused by either market news or current events all over the world, which have an effect on the demand and supply of these currencies.

This law of demand and supply is what works well in this Forex market too. When the demand of a particular currency goes up, its market price also escalates as compared to the other currencies in the market.
Similarly, if the demand of a particular currency goes down, traders are no longer interested in holding it back with them, and so the market price of the currency also decreases.

Economic development

It is quiet obvious that the traders trading in currencies and interested in exchange markets, will be equally keen and interested in knowing about the overall economic development of the countries whose currencies they hold, or are interested in buying. Every trader wants to be convinced that they economy they are about to invest in is developing with a solid and steady growth, which can be known by studying various factors such as unemployment, import and export, and the GDP statistics of a particular country.

Rise in Unemployment experienced by any particular country is considered as a negative factor, whereas a fall in Unemployment is always measured as a positive aspect.

Similarly, an increase in the GDP figures of a particular country is considered as a positive feature, whereas a decrease in GDP figures is always measured as a negative aspect.

Also, a mount in the Exports numbers of a particular country are always considered as a positive trait as compared to the decrease in Exports numbers which is looked upon as a negative aspect.

Political strength

Lots of factors are responsible for determining the political stability of a particular country. These factors can be any kinds of alterations in government or by the government, rising unemployment rates, elections or international and political conflicts.

Every investor is cautious enough and considers all these factors in his mind before going in for investing in a particular economy.

Any kind of Political conflicts, natural calamity or terrorism attacks or wars are major contributors in making or marring the economy of a country.

Interest Rates

Around the world, interest rates are always followed by money. If the interest rates of a particular country rise up, investors big and small from all over the world would want to invest their money with it in order to gain higher returns on their investments.

Mostly it can be said that if you want to capitalize on higher investments, then you have to keep an eye on the rise and fall of the interest rates in a particular country. And the factors which will help you determine this rise and fall are mostly the financial rise indicators in addition to the speeches of the current leading, dominating and significant figures like big politicians, iron and steel magnets and businessmen.
The interest rate movements generally take place during the programmed meetings by the central banks like BOE, FED, ECB, and BOJ.

An increase in the Interest Rates is always considered as a positive factor for a particular country as compared to the decreased in Interest Rates.



 

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