What makes a currency move up or down in regards to Forex trading?
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Answer:
Yep you got that right, supply and demand does affect the currency price but what affects the supply and demand? I believe that the supply and demand depend on the level of trade ( foreign investment) that a country does and also the nation's inflationary expectations.
There are also non economic factors that affect the movement of the currency and these include political issues/instability(terrorist attacks & war) and also natural disasters. These are usually unprecedented and usually affect the currency greatly. There are probably other factors that affect the movement of the currency in forex trading and the sources that i recommend are below.
..... the demand ......
The currency rates fluctuate due to demand-supply equations. If a currency is in high demand or highly preferred as a payment option while conducting a transaction; it will have a high rate in terms of other available currency and vice-versa.
Also refer these sites for a better understanding:
http://www.alpari-idc.com/en/markets/for...
(Here the explanation is given with the help of a case-study)
http://en.wikipedia.org/wiki/exchange_ra...
(Fluctuations in exchange rates section)
http://en.wikipedia.org/wiki/foreign_exc...
It is the deman and supply of the currency that makes it go up and down. If the demand is more and the supply is low then that currency will move up and vice versa it will move down.
There are tons of reasons - but here are a few:
1) Inflationary expectations. More inflation expected, the less worth your currency has.
2) Trade balance. Trade either brings in foreign currency or sends yours out. In the case of the US, if China, Japan and other countries weren't buying our treasuries, all those people would be selling the dollar for their own currency.
3) Political/other risks.
All movements are governed by traders buying and selling. Larger movements normally indicate panic buying or selling.
Have a look at http://currencytrading.hammocksurvivalgu...
for lots of interesting articles about currency trading.
Who cares and who knows. When I google forex I see lots of people saying be right 80% of the time. No one really knows and they can only say there right after the fact. So as long as you make money either way. If you really want to invest in the forex market. Go here. www.freedominforex.com
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