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Why does foreign exchange fluctuate

{}Posted in2023/2/26 19:44:20 | 6Browse

because of supply rebatesforexbroker demand. The ex forexrebatecommissiontence of cashback forex trade, international best forex rebate company, and international speculation makes it necessary for banks to maintain a certain foreign exchange position. To provide customers with transfers, payments, etc. Countries also need to reserve a certain foreign exchange position to protect their currencies from financial shocks or to purchase st bestforexrebatecompanygic resources on the international market. When a banks foreign exchange position is insufficient, it can buy foreign fxrebatecentral from other banks on the international market to maintain its normal operations. When a banks foreign exchange position is too large, it can improve its reserves by buying from other banks in exchange for more of its own currency, or by exchanging other currencies with other banks. Thus, the exchange price between banks forms the foreign exchange rate on the international market. The next price movement is the same as in the case of stocks. If international investors are optimistic about the future of a certain country and are willing to hold its currency, then more people will exchange for it and the demand will exceed the supply, and the price of the currency will naturally rise. And vice versa. There are many factors that affect exchange rate fluctuations, but in summary, the main ones are as follows: a countrys economic growth rate This is the most basic factor that affects exchange rate fluctuations According to the macroeconomic theory of Keynesian school, the growth of GNP will cause the growth of national income and expenditure The increase in income will lead to the expansion of demand for imported products, which in turn will expand the demand for foreign exchange and promote the devaluation of the local currency While the growth of expenditure means Social investment and consumption increase, which is conducive to promoting the development of production, improve the international competitiveness of products, and stimulate exports to increase the supply of foreign exchange so in the long run, economic growth will cause the appreciation of the currency Thus, it seems that the impact of economic growth on the exchange rate is complex, but if we consider the role of currency preservation, exchange psychology has another explanation that the value of the currency depends on the subjective supply and demand for foreign currency made by the two sides of the currency This subjective evaluation of the comparison is the exchange rate and a countrys economic development trend is good, the subjective evaluation is relatively high, the countrys currency is strong balance of payments This is the most direct impact on the exchange rate of a factor called the balance of payments, simply put, is the import and export of goods, services and capital imports and exports balance of payments if exports are greater than imports, capital inflows, meaning that the international market for the country Conversely, if imports are greater than exports and capital flows out, the demand for the countrys currency in the international market will fall and the currency will depreciate. The high rate of inflation indicates that the purchasing power of the local currency decreases, which will prompt the currency to depreciate and conversely, it tends to appreciate The difference in the level of interest rates Some scholars believe that the impact of interest rates on the exchange rate is mainly achieved through the impact on arbitrage capital flows, under mild inflation, higher interest rates will attract the inflow of foreign capital, while suppressing domestic demand and reducing imports, making the local currency higher But under severe inflation, the Interest rates become negatively correlated with the exchange rate peoples psychological expectations of this factor in the current international financial markets are particularly prominent exchange psychology that foreign exchange rates are the subjective psychological evaluation of foreign exchange supply and demand for the concentration of the currency evaluation of high, strong confidence, the currency appreciation this theory plays a crucial role in explaining the numerous short term or very short term exchange rate fluctuations in addition, the impact of exchange rate fluctuations Factors also include the governments monetary and exchange rate policies, the impact of unforeseen events, the impact of international speculation, the release of economic data and even the impact of the opening and closing of the market
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