The fluctuation of foreign exchange rate is a problem that every wager should understand, but what are the main factors that affect the fluctuation of foreign exchange rate?
Economic news or statistics Whatever model is thought to be most relevant to exchange rate decisions, economic changes are clearly important factors.
Economic news to tell us what’s happening, and economic and social and tell people the future may be how to development of economy and society more like a super tanker sailed the sea, they have huge forward momentum, and response to the control instruction is quite slow, the control instructions include fiscal policy in economic and social changes and the pu.
With great forward momentum, markets have a good sense of where the economy and society are going.
Yet markets respond, sometimes dramatically, to shocks of statistical information that lead to changes in expectations.
Many statistics have revealed that the exchange market will react to the adjustment in two steps.
The first response will be based on economic theory;
The second step will depend on how the monetary authorities react.
Thus, higher inflation expectations lead to a devaluation of the currency, because higher prices will make the country’s exports less competitive, but the acceleration of inflation will lead the government to raise interest rates, thus stimulating the inflow of short-term funds.
Note that higher interest rates will lead to slower economic growth and thus adversely affect the foreign exchange rebate market.
Short-term bond markets will react negatively to higher rates;
Long-term bond markets are likely to benefit from government efforts to curb inflation.
It is becoming increasingly difficult to determine whether currency market reactions are driven by economic news or statistics as the market trades more widely.
This makes the role of economists and economic analysis increasingly important.
Politics Another important factor affecting foreign exchange rates is politics.
Although the business cycle is unpredictable in terms of time and amplitude of shocks, the business cycle factor has been fully considered and applied in organizational life.
In some countries, such as the United States, political factors are fixed, such as the determination of the election day there is no room for change.
But in other countries, such as Britain, the political cycle is more flexible, with the government having the right to choose a timetable for elections before the latest deadline.
The economy is one of the primary considerations for currency speculators, so governments try to capitalize on factors that appeal to voters, such as rising incomes and falling unemployment, as the day approaches.
Intervention Intervention can be either verbal or practical.
Verbal intervention is when the authorities influence the value of a currency only by issuing statements (speech).
Actual intervention is when the authorities use XAUUSD reserves and foreign exchange reserves to buy the local currency, raising its value by increasing the demand for the local currency.
However, since XAUUSD and foreign exchange reserves are limited, unlimited intervention or support of a currency will inevitably lead to the depletion of XAUUSD and foreign exchange reserves, so such intervention cannot be indefinitely sustained.
Given the size of the global foreign exchange market, the impact of central bank intervention in the foreign exchange market is always limited.
Central banks are also well aware that their limited foreign exchange reserves will have a very limited impact on currency markets, and that intervention to reverse the direction of a currency is hardly practical.
But this does not negate the continued ability of central banks to influence currency markets and prompt them to assess whether a currency move is or is justified.
Joint intervention, in which two or more national central banks intervene in markets, seems to work better than currency intervention by a single national central bank.
That is because a coordinated intervention by central banks signals an international consensus on the need to change the value of a currency or even several currencies.
Normally, such joint interventions are undertaken by the G-7.
The above three main reasons for foreign exchange exchange rate fluctuations, I hope that speculators can understand, timely detect exchange rate fluctuations, avoid losses.
