Factors that Cause Currencies to Fluctuate

Posted on January 13, 2008
Filed Under Forex Education |

In Forex Trading, the cumulative buying and selling of a currency causes it to move either up or down. There are numerous factors that cause the fluctuation of exchange rate.

• Government and Central bank monetary policy and balance of payment.
• A country’s political, social and fundamental economic environment such as economic growth rate, inflation and interest rate.
• The inflow and outflow of capital between nations - be it physical or portfolio flow.
• Central bank abilities to back up it own currency during speculative attack will provide faith to calm its currency price.
• Speculative activities by professional currency manger with billions of funds can also sometimes move the market.

Movement of the currencies is ultimately dictated by demand and supply. However, predicting demand and supply in Forex Trading is not as simply and straight forward one would think.

Cheers, Kampai, Proscht^^!!

Comments

4 Responses to “Factors that Cause Currencies to Fluctuate”

Viv :=) on January 13th, 2008 5:11 pm

Hi, thanks for sharing this article.
That’s a great eye opener to me…never give much thought about what’s involve in forex. Shall be back for more education on forex soon!

Cheers^^
Viv :=) on January 13th, 2008 5:14 pm

Btw, thanks for the tip
Norm on January 15th, 2008 2:52 am

I find most of your articles quite interesting. Keep it up!!
jeferrer on January 17th, 2008 2:29 pm

i agree on what you enumerated as some causes of currency fluctuations. However, do yo think dependence of a nation to certain products with dwindling supply such as oil can be a significant driver?

anyways, nice blog you have…keep it up!