Factors driving the foreign exchange market
- 8월 14, 2017
- by
Factors driving the
foreign exchange market
The interest rates set by the central bank have the greatest impact on the exchange rate movements. Since the currency represents the economy of the country, the difference in interest rates affects the relative currency value.
The increase in interest rates can encourage traders to invest in the market and increase call demand. Investors are more likely to purchase assets denominated in high interest rates.
If the interest rate declines, investors generally will not be able to buy assets in the economy because they will reduce their return on investment. This can weaken the demand for economic assets and lower the value of the currency.
Statements such as GDP figures, unemployment benefits and manufacturing data can have a significant impact on the foreign exchange market because they affect confidence in the country's economic stability.
Each individual trader has a personal view of the direction of the foreign exchange market, but market sentiment indicates how the majority of market participants will perform the market.
When making a decision, foreign exchange traders use more scientific methods such as technical analysis and measure market sentiment.
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