Forex What factors influence Forex exchange rates?

[Nite]

Several factors can influence forex exchange rates.

Interest Rates
Central banks’ decisions on interest rates play a significant role in influencing forex exchange rates. Higher interest rates attract foreign investment, increasing demand for the currency and causing it to appreciate.

Economic Indicators
Economic indicators such as GDP growth, employment rates, inflation, and trade balance can impact a country’s currency value. When the economy performs well, it usually results in a stronger currency.

Political Stability
Political stability and performance can affect a country’s currency value. Countries with stable governments and policies are more attractive to foreign investors, leading to a stronger currency.

Market Speculation
Speculation in the forex market can lead to short-term fluctuations in exchange rates. Traders’ perceptions of future economic conditions can drive buying or selling of currencies.

 

[moonchild]

This depends on the currency that a particular country and which and what country they are depending on when it comes to trading, in my country Nigeria, we mostly trade with the USD, during imports, exports or any sort of exchange that involves foreign affairs, even tuition fees are paid in USD for international students.

So due to our high dependence on the currency whenever something happens that affects our import or export, inflation will be triggered because if the dollar is not available or hard to source or even expensive compared to the local currency then price of commodities will skyrocket.

 

[Ramolak19]

You have made some reasonable points so far and several factors influence forex exchange rates. These include interest rates set by central banks, inflation rates, economic growth and stability, geopolitical events, government policies, and market speculation. Changes in any of these factors can cause currency values to fluctuate. For instance, if a country's interest rates rise, its currency may strengthen. Similarly, political instability or negative economic data can lead to a depreciation of a currency. Market participants closely monitor these factors to make informed decisions in forex trading.