Factors Influencing Exchange Rates
Exchange rates are driven by a combination of economic, political, and psychological factors. Key influences include:
- Interest Rates: Higher interest rates attract foreign capital, boosting a currency’s value.
- Economic Indicators: Metrics like GDP growth, unemployment rates, and inflation affect market sentiment.
- Political Stability: Countries with stable governments and low corruption levels tend to have stronger currencies.
- Market Speculation: Traders’ expectations and actions can amplify currency movements.
Understanding these factors is crucial for making informed trading decisions.
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