The term forex means foreign exchange. This market is not a static one, it fluctuates based on various real-time elements. Now, let's discuss some major factors among various elements that affect the forex market.
First, is the inflation rate, which is capable of causing variation in the foreign currency exchange rates. When the inflation rate lower than it increases the currency value of the country. So, the investors and business-oriented people look for an area where the inflation rate is low so that the currency value would be high. Also, read Tips for Students planning to Study Abroad
Second, is
the interest rate, which is straight opposite to the inflation rate. It means
that it should be high to support the economy so that exchange rates would be
higher. However, the inflation rate, interest rate, and exchange rates are
interrelated for economic growth.
Third,
Government debt where the foreign capital notices it over the years that have
been passed to decide whether to invest in currency. If the government debt is
higher the money exchange rates would be lower.
Fourth is speculation, this affects when the foreign capital comes to know there would be an increase in currency value, they would demand more currency. So that it would help them to make more profit in the future.
Fifth comes to the recession. Recession directly affects the value of the currency. This resulted in an increase in the exchange value of the currency. This is the reason, why money exchangers are not appreciating recession.
Finally, one among the various factors is the terms of trade which
implies the ratio between the export price and import price. The currency of the
country becomes valuable when the export price rise to a great height compared
to the import price. There comes the demand in the value of a currency that causes a rise in the exchange rate.
Also Read:
Importance of E-Kyc in Forex Market
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