Foreign Exchange Market and Currency

The value of one currency to another keeps changing due to the forces of demand and supply. “So it is safe to say that a currencies value is not influenced by one single force, but by several. These forces generally fall into three categories: Market Psychology, Economic Factors and Political Conditions. “( http://papaternalisticcoComMarket Psychology This is the most difficult aspect of the other forces. It is difficult to comprehend, anticipate or even to adhere to for many people. It implements the psychological effects that are made on the currency pricing system.

It is hard to get hold off as it does not have any financial statements or central bank policy decisions. Economic factors * Economic policy: These are set by government fiscal/ monetary policy which is controlled by the government and has a major effect on the impact of the changes in * Economic conditions: Economic conditions including inflation levels and currency. trTrends Economic growth and health: Things such as GDGAPnd other factors that effect the currency pricing. Government budgets and deficits: These are the factors that are based on the governmental control on the budgets and other financial related aspects.

Political Factors * Internal and international political factors can affect currency prices in the currency market. * Political instability can have an effect on the economy. * Political relations between two nations can have an effect on the currency values of those two countries. * Elections and shift in ruling party These factors have an influence on the currency pricing. This can lead to many variations in businesses that involves the use of both currencies and even when an ndindividualhooses to buy foreign currency.