Economic Factors behind Currency Exchange Rates
Modern Monetary Theories about Exchange Rate Volatility
According to the modern theories on short-term exchange rate volatility, the international capability and the supply and demand of financial assets determine the divergence between the purchasing power parity and the exchange rate.
The Theory of Elasticity Explained
A theory concerning the determination of the exchange rate is the so called theory of elasticities.
Purchasing Power Parity (PPP) as a Theory of Exchange Rate Determination
There are several theories behind the determination of foreign exchange rates. One of them is the Purchasing Power Parity (PPP) approach.
Purchasing Power Parity and the Forex Market
Purchasing Power Parity (PPP) represents a fundamental factor that is a driver of the movement of a currency on the forex market.
Capital Flows and Trade Flows: Forex Market Impacts
Fundamental analysis studies the impact of economic, political and social factors on supply and demand. Therefore capital flows and trade flows are considered the basic drivers of the movement of exchange rates.
Australian Economic Indicators and the Forex
There are several economic indicators forex market traders should keep special attention to when they consider the investment in the Australian dollar (AUD).
The Reserve Bank of Australia (RBA)
The financial entity that is responsible for the monetary and fiscal policy of Australia is the Reserve Bank of Australia (RBA).
General Overview of the Australia Economy
With a GDP (Gross Domestic Product) of over $750 billion (2006) Australia's economy can be classified as a relatively small one.
New Zealand's Economic Indicators Important to Forex Participants
There are several New Zealand's economic indicators to which forex participants should pay special attention to when they consider the investment in the New Zealand dollar (NZD).
The Reserve Bank of New Zealand (RBNZ)
The financial entity that is responsible for the monetary policy of New Zealand is the Reserve Bank of New Zealand (RBNZ).
New Zealand's Economy Conditions
New Zealand has a relatively small economy with GDP (Gross Domestic Product) of about $103 billion (2006) and its population is also small in size.
Swiss Economic Indicators to Examine
There are several economic indicators forex traders pay special attention to when they consider the investment in the Swiss franc (CHF).
The Swiss National Bank (SNB)
The central bank of Switzerland that is responsible for the monetary and fiscal policy of the country is the Swiss National Bank (also known as SNB).
General Overview of the Switzerland Economy
Switzerland's GDP (Gross Domestic Product) of almost $380 billion (2006) places its economy on the 20th position in the world.
Japan Economic Indicators Important for Forex Market Trades
Here is a list of the indicators of the Japanese economy you should closely examine for your forex market trades.
The Bank of Japan (BoJ)
The central bank of Japan is the Bank of Japan (BoJ). This is the financial institution that is responsible for the key monetary policy.
Economic Overview of Japan
Japanese GDP (Gross Domestic Product) of over $4.3 trillion (2006) makes it the country with the second largest economy in the world.
Euro Indicators to Watch
When studying the movements in the value of the Euro you should analyze several indicators.
The European Central Bank (ECB)
The financial entity that is responsible for the establishment and governance of the monetary policy of the member countries of the European Monetary Union is the European Central Bank (ECB).
Economic Overview of the European Monetary Union
Twelve of the member states of the European Union share the Euro as their common currency. They make up the European Monetary Union (EMU).
UK Economic Indicators
The UK economy is characterized as service oriented. There are several important indicators of the UK economy you should pay special attention to.
The Bank of England (BoE)
The central bank of the United Kingdom is called the Bank of England (also known as the BoE).
General Overview of the UK Economy
The United Kingdom (UK) enjoys the fifth largest economy in the world with a GDP (Gross Domestic Product) of over $2.3 trillion (2006).
Canadian Economic Indicators
When you study the economic conditions in Canada in order to make better trade decisions on the forex market you should pay attention to certain economic indicators.
General Overview of the Canadian Economy
Canada has experienced a consistent growth since 1991, which has led to its status as the world's 8th largest economy with a GDP (Gross Domestic Product) of over $1 trillion (2006).
US Economic Indicators Important for Forex Trading
There are several important economic indicators concerning the US you should pay special attention to.
General Overview of the US Economy
The United States enjoys one of the most developed economies. Its GDP (Gross Domestic Product) for year 2006 is over $13 trillion.
Reserve Currencies
After the Breton Woods Agreement the US dollar turned into global reserve currency. However, there are other international reserve countries besides the USA.
New Zealand's Dollar (NZD) Traits
The NZD (New Zealand's currency) is strongly related to the AUD. Another characteristic of the NZD is its correlation with commodities.
Australian Dollar (AUD) Traits
The Australian dollar (AUD) is characterized as being commodity linked and correlated to the values of the gold.
Swiss Franc (CHF) Currency Traits
The Swiss franc (CHF) is famous for its safe nature. The GBP/CHF and AUD/CHF represent the currency pairs that are most commonly used in carry trades.
Japanese Yen (JPY) Currency Traits
The Japanese yen (JPY) is used as a major gauge for the overall strength of the Asian economic conditions. The EUR/JPY and the EUR/USD currency pairs have the most influence on the movement of the USD/JPY.
Euro (EUR) Currency Traits
The Euro currency enjoys high liquidity. The currency pair EUR/USD is the most liquid one among all Euro crosses.
British Pound (GBP) Currency Traits
The British pound (commonly referred to as GBP) is one of the most liquid currencies in the world. The GBP/USD currency pair is one of the four most widely traded.
Canadian Dollar (CAD) Traits
The Canadian dollar (CAD) is characterized by its strong connection to commodities.
US Dollar (USD) Currency Traits
The US currency represents one of the most widely used one concerning currency deals. Liquid currency pairs include: USD/JPY, USD/CHF, EUR/USD, and GBP/USD.
Major Currency Pairs
Currencies in the forex market come into pairs and are connected with a particular exchange rate. Here you'll find the major currency pairs.
Central Bank Activities and Interventions in the Foreign Exchange Market
The movements on the forex market are influenced by the discount rates and monetary operations of the US Federal Reserve System (also known as FRS) and the central banks of the other countries.
Milestones in Currency Exchange History
In the 1940s the overall condition of the economy was characterized by significant instability. 44 countries held a meeting in Bretton Woods, New Hampshire, in order to set a fixed exchange rate, at which currencies to be traded.