Factors that affect exchange rates

Here we are going to talk the factors that influence the forex trading market so every forex trade must know them and understand its indicators to avoid the loss and achieve more profits

Exchange rates:

The value of the currency trading between  two countries will help to determine the amount of what the importing party pay for imported goods, and also specifies the value that will get the exported party

ex: When the value of the American dollar  decrease,  American imports become much more expensive, thus reducing the amount of  imported goods in America. At the same time,other countries will pay less for u.s. goods that will increase exports of u.s. goods. The value of the currency trading between the two become significant, especially if the size of the exchange between those two countries is high.and in forex trading or at  stock trading it is very important to know the factors that affect exchange rates. These factors include:
supply and demand of the country's currency, interest rate, inflation, and investors ' confidence.

Factors that affect exchange rates

1-Supply and demand of the currency of the country

Currency trading rates for every country is affected by the size of the supply and demand for that currency on world exchange markets. If demand has an increased size that will raise the prices of the trading for that country currency and vice versa.

2-Interest rate and inflation

There are many factors that affect the size of the supply and demand for the currency of any country. If the surplus of interest rate vs inflation rising in the country, this will motivate investors to invest in that country, which will lead to increase the demand for the currency of this country. And vice versa. so we concluded that the interest rate and inflation factors are very important in determining the currency of any country.

3- trading balance

The most important factors behind to the  change of the exchange rate in the medium-term, the deficit in the trade balance   necessarily leads to a decline in the exchange rate .demand for the currency of a specific country will be  high for that export more imports to cover the deficit. At the same time  demand for other countries currency  that import more than export   would be a low and that will increase the deficit in its trading balance.

4-Investors confidence 

Investor confidence  affects the exchange rates. If the investor confidence is high in the country's economy, the prospect of  buying assets in that country would be high, and what drives the value of the country's currency to rise.