Factors to consider in the Foreign Exchange Market (FOREX) online Trading
The value of a country’s currency is influenced by many factors:
The country economy
The country trade deficit
Political and social environment influence the rise and fall of a currency
If the government’s deficit increases, its currency’s value will automatically fall. As the government decreases its deficit, the currency can begin to recover value. The same happen with a country’s trade deficit. If the country imports more goods and services than it exports it will have a negative influence on the currency.
If the inflation becomes rampant the currency is valued less because it’s also viewed as unstable. As the rate of inflation begins to decline the currency begins to increase in value.
Politics and social changes can affect the currency rates.
Changes in the regime can lower the value of the country’s currency in the short term and continue into the long term. If the present government makes decisions that are looked at negatively it can decrease the currency value as well. The opposite can happen. Current government officials can make policy changes that are viewed positively by the rest of the world and that can increase the value of the currency.
Interest rates and price of oil can have a major impact on the value of the US dollar.
Interest rates can affect how much it’s going to cost to borrow money and how much can be earned on investments. Historically if the US raises its interest rates it attracts foreign investors. Those investors have to sell their own currency to buy U.S. dollars to purchase treasury bonds.
If interest rates begin to drop, investors may purchase Euros as an alternative investment which lowers the value of the US dollar.