The dynamics of exchange rates

Currency is the "good" on which there is always a supply and demand. It is easy to guess, that when demand grows for a certain currency it's price will go up. The unwillingness of traders to buy any certain currency, naturally, leads to it's price falling. Economic data are the factors which help to define the direction of a future trend.

Main thing: news can be expected and unexpected

In this case the rule works: buy the rumors, we sell the facts. One more proverb: "Information is money". This is specially true in the currency market. 

The market prepares for "expected" news beforehand and includes them in the price in advance. Therefore as news breaks changes of exchange rates are not usually effected. But in the case of unexpected news the market can be the most interesting. Exchange rates, can dramatically increase or decline and these sudden changes result in some traders becoming very rich and some becoming very poor in a matter of hours.

It is good to apply the fundamental plan by developing and adopting a long-term strategy.

Economic stability

Traders closely watch the economic development of a country: the data about the gross national product and unemployment. Investors aspire to invest in a stable and prosperous economy.

An example: The Volume of retails in England for September of 0,7 % in comparison with August. Expectations of economists were planned at a rate of + 0,4 %. And a gain in sector of sales of food stuffs - 1,4 %. All this economical data should solitarily affect the rate of the English currency.

The prices for energy carriers and nonferrous metals

The dynamics of the prices for oil and nonferrous metals substantially define movement of currencies, such as the American dollar, the Japanese yen, the Australian dollar, Canadian dollar.

An Example: the Rise in the price of oil and mineral oil in the USA jumped up as a result of destructive actions of hurricane "Katrina". The cost of "oil" in the USA jumped up to 70 dollars for barrel. Some senators voted for the use of a strategic oil resource of the USA. All of this, certainly, reflected negatively in the dollar exchange rate in relation to the euro.

Interest rates

By means of interest rates the central bank of a country has an opportunity to influence the interest rates of commercial banks, the rate of inflation in the country and the rate of national currency.

The increase of interest rates leads to decrease in inflation and rise in price of national currency.

The dynamics of interest rates is defined by many economic indicators; the basic being the rate of inflation. Also, important applications of influential political people are considered. Decisions on growth or decrease in rates are accepted at regular sessions of the European Central Bank, the Bank of England, the FOMC of the USA, the Bank of Japan and other banks.

An example: the decrease in interest rates always triggers a decrease in an exchange rate of a state. As a positive example here it is possible realize the growing appeal of the dollar, due to constant increasing of the rates of the FOMC of the USA.

The political climate

The favour of investors in a country in many respects depends on its political climate, the rate of unemployment, and word. In case of political uncertainty of a country, investors often refrain from investing in its economy.

An example: in 1917 in Russia there was a revolution. The enterprises with the foreign capital, and all the others, were nationalized. It, undoubtedly, caused a sharp falling of the Rouble exchange rate and the Russian securities at the international stock exchanges.

The natural both technogenic phenomena

The nature and technogenic incidents - the most unpredictable factors are capable in a flash of changing e an alignment of forces in the financial markets. Consequences of accidents of extensive scale are globally reflected in all spheres of society, not excepting the currency market. There can be sharp decline of the value of of the currency of that country where there was has been an extreme situation.

An example: Acts of terrorism in the USA 11.09.2001. The given accident in the USA became the reason for the sharp decline of share prices for tourist and airlines. Experts did not dare to predict the consequence of acts of terrorism in the USA for the world markets for a long time.

Since oil prices have grown sharply prices for the oil they have sharply the dollar exchange rate has declined dramatically.