What moves the currency markets?

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More money is traded in the currency markets daily than in the stock markets in a year; around $1.5trillion. The vast majority of this is not bought or sold for overseas business, holiday or property transactions (transactional foreign exchange), but is traded by speculators and investors buying and selling currency to make a profit (speculative foreign exchange).

These traders will place their funds in whichever currency they believe will produce the highest returns. The reason that exchange rates change (as frequently as every second) is due to the simple rules of supply and demand. The more people who want a currency, the more expensive it becomes.

But how do these traders decide which currencies to buy and which to sell?

Each trader will have a different strategy, but things they consider include:

This will include interest rates, inflation and unemployment. For example, if a country (currency) has a high interest rate then the economy is growing and unemployment is low, therefore the currency is likely to be strong. If the currency is strong its demand will increase which will drive the price up further.

There are many factors which affect exchange rates and no one can ever really predict what will happen. However, personal currency specialists, such as the experts at Currency Solutions, can work with you to ensure you are protected against adverse movements in the foreign exchange markets. They can also provide you with daily and weekly news updates

to help keep you informed and make an educated decision about how and when to make your moves in the market.

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What moves the currency markets?

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