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Forex Rates – What are the Factors Affecting Foreign Exchange Rates

Forex rates drastically changes from day to day or even shorter and this is because of the activities in the currency trading market. There are factors which contribute to the change of rate for a given currency. In this article, we are going to discuss these factors so that we can understand how forex trading operates.

The fluctuating value of currency in each country is the result of the currency trading that happens in the Forex market. The value changes because of certain transactions such as the export and import system where one needs to trade his currency and convert it to the currency that the buyer will accept. In this example, what is called the exchange rate is the worth of a certain countries currency when it is exchanged to other country’s currency.

Meaning to say, when the currency is more demanded the exchange rate of that currency will increase and if it is not demanded then it’s the opposite. This situation is the most common example of the factors that directly varies with the exchange rates.
Let’s get to know these factors more.

In Economics the variation of the currency rate is determined to be directly proportional to the supply and demand of currency in a certain country. Let’s take the Australian Dollar (AUD) and US Dollar (USD) for example. If the demand for AUD will increase then it will result to a decrease in USD. This interpretation is also true in the value of goods that are available in our market. If you notice, the value of goods will increase when there is a big demand for it but if the supply is many then the value of goods will depreciate.

These factors should be given considerations when you are engaged in the currency trading currency because they play a vital role in the global trade. Forex rates will determine the strength of a certain country so if the exchange value is high therefore the economy of that particular country is very good. Forex rates will also be the factor for more investment in a country because businessmen from different countries will definitely put their money in a country where there is a stable economic growth.

Now that you know the factors that will increase or decrease the value of forex rates, you can then determine which stocks in the market you are going to invest.

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