Cost Effective Exchange Rates @ forexrates.today

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5 Factors that determine the Currency Exchange
Rates?
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Many beginners wonder about how exchange rates
move? Which factors are driving forex rates? It
is important to study and understand these
factors for building good forex trading strategy.
Forex rates show the economic health of the
country. That's why they are always analysed. If
you want to do successful trading, you need to
keep an eye not only on currency rates today but
also the factors that influence them.
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Demand and supply rule
Exchange rates are influenced by the law of
supply and demand. The demand of currency is
influenced by several factors, such as interest
rates, economic growth and inflation. Just take
an example, if the demand for American goods is
higher, this increases the value of the dollar.
If the traders or investors are in doubt about
the future of the US economy, they would begin
selling the dollars which would result in decline
in the value of the currency.
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Inflation rates
At the time of inflation in any country, the
price level of goods and services rises which
reduces the value of the currency of the
particular country. A country having constant
lower inflation rate sees rise in its currency
value. On the other hand, higher inflation
results in depreciation in the currency.
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Interest rates
Higher interest rates always attract investors to
invest in the particular country's banks. The
good rate of return enhances the demand of the
dollar. At many times, central banks manipulate
interest rates, which influences exchange rates.
However, in case of higher inflation compared to
the other countries, the high interest rate
policy doesn't have an impact on dollar's
exchange rates.
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Government Debt
A country with public debt gets less flow of
foreign capital which creates inflation. If the
market predicts debt, forex traders tend to sell
their bonds. Naturally, it results in decreasing
the value of forex rates.
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