What Affects Currency Fluctuations? These Are 5 Things That Cause
Fluctuations in a country’s currency have a very significant influence on society and the economy in the world. For the economy, currency fluctuations greatly affect the number of exports and imports carried out and for the public, especially traders in the forex market, currency movements are a lucrative profit opportunity.
Seeing the impact that is very influential on the economy, then in this discussion we will explain the various causes that make a country’s currency fluctuate.
Here’s a further explanation.
1. News Release Release and Actual Release Data
The data that we mean here is covering economic indicators in a country, where traded currencies are national, information about interest rates, and various other economic information.
When will determine more influential events it is quite difficult to do between waiting events or future events. The thing that is certain is that a serious event will make currency movements move significantly and continue.
Information relating to important economic events will be published in the economic calendar. Before an event occurs usually predictions related to its effect on the exchange of currency will be done by analysts.
To anticipate future events, the exchange rate usually starts to move in the predicted direction. The interesting thing is that when estimates are proven, the exchange rate starts to move in opposite directions.
2.Activities of Influential Funds Against Currency Fluctuations
The fund activity we mean here is the flow of investment in various currencies in the world. A large flow of funds makes them able to change the exchange rate in a certain direction.
Capital management is usually carried out by fund managers and they have their own methods in the short, medium and long term. The decision of the fund manager in opening a position is done after they have carried out fundamental, technical analysis and so on.
Market analysis will not be able to deliver truly accurate results, but with large funds proven to improve the strongest trend.
3. Activities carried out by importers and exporters
Exporters and importers will predict exchange rates to make more profitable purchases or sales of currencies. These exporters and importers will certainly follow the trend with the goal of protecting against currency risk.
Opening transactions opposite to future transactions may reduce the risk. The thing that you need to pay attention to is the influence of the activities of exporters and importers in the financial market in just a short time only. This happens because the volume of transactions is not too large in size with the overall market.
4. Statements Made Politically Can Affect Currencies
The statements of these politicians can be in the form of press conferences, meetings and report submissions.
The concern is that sometimes these statements are unpredictable and make strong and unpredictable fluctuations. Statements containing long-term data can lead to a long-term trend.
It could be in the event that there will be intervention by the central bank. This can happen because it is considered to have a significant influence on the market. Because in just a few minutes, the exchange rate can move within a few hundred points.
5. There are Government Interventions through the Central Bank
Countries can easily influence the exchange rate of currency through existing currency transactions. Countries that are interested in the growth in consumption levels and developments in the industry will regulate their exchange rates. The intervention can be done by providing direct and indirect regulations. When direct regulation occurs, it can cause inflation levels, the amount of money in income, and so on. While direct regulation includes cutting policies and currency intervention.
Currency interventions related to increased expenditure and income in large volumes from international markets. In this case the central bank will not reach the market directly, but they will use existing commercial banks. The volume that occurs can be in the amount of millions of dollars, therefore the intervention carried out can greatly affect currency fluctuations.
Sometimes it also happens that central banks from different countries carry out concurrent interventions in financial markets.
There are many reasons why a country’s currency moves in the market in general.The first reason is the influence of economic news that occurs in a country, the second reason relating to the flow of funds in the financial market, the three financial activities of exporters and importers, the four statements made by politicians, and the last reason is the intervention carried out by the government.
All these reasons are important to watch out for and watch out for in order for you to make good trading decisions. Do not let the trading activity that is done losers because you are not able to predict price movements in the financial market.
We hope the information we have submitted above provides many benefits for all of you who have read it. If the explanation we have stated above is not very clear, you can ask us through the comments column below. We will be happy to answer any incoming questions.