Discussion in 'Forex' started by bukhalifa, Jun 16, 2007.
Why does a currency increase in value if a govt increases the interest rates?
Simple, supply and demand.
People want to hold currencies that pay good interest rates. Low interest rates makes borrowing currency cheeper.
Its SImply All economics.
Read this article:
An introduction to Forex
Forex is an ellipsis for the phrase "foreign exchange," it has to do with the correct and timely calculation of the rate of exchange between any two national currencies. Forex impacts many people's lives on a daily basis. Following are few examples on how Forex trading works in various scenarios.
As many different factors impact the value of the currency of any country, having a relatively steady process for calculating the current value of one currency to another allows trade to carry on nonstop on a global scale. For instance, a country that is going through a stage where it is importing more than what it is exporting might see the worth of its currency, and thus the Forex rate, suffer on the global market. Simultaneously, the election or appointment of new governmental figures could either improve or weaken the value of a country's currency in evaluation to other countries, based on how those new government bureaucrats are perceived by the global community.
Natural disasters could be another example of a condition, which could impact the worth of currency as decide by the foreign trading system. Simply put, a country that remains major damage to its exported goods and services would as well see their currency decrease in value in contrast to other countries.
The balance of Forex trade between any two countries could as well have an impact on the rate of exchange between those two countries. Ideally, the Forex trade balance would constantly sustain within a range, which is adequate to the two countries. This would result in a Forex rate that would only differ somewhat from one period to the next. Sudden changes in the balance of trade would as well result in a marked change in the Forex rates that in turn might be good for one of the countries, but not always for both.
Forex trading strategies changes and could be positive or negative for any given country and its citizens, depending on the circumstances. One significant factor to note is that Forex is in a steady state of flux that means that if you are not happy with the rate of Forex exchange today, you could anticipate some difference in the Forex a month from now.
It shall give you information in broad scale in economic point of view.
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