What factors influence currency exchange rates?

Let's look at five important factors that influence exchange rates. Aside from factors such as interest rates and inflation, the currency exchange rate is one of the most important determinants of a country's economic health. A higher-valued currency makes a country's imports less expensive at home and its exports more expensive in foreign markets.

What factors affect forex exchange rates?

Stock, bond, commodity, and other capital markets also have a strong influence on exchange rates. International trade numbers, such as trade deficits and surpluses, play a vital role in forex markets. Political news can also be important for forex traders, especially when unexpected outcomes occur.

Why are foreign exchange markets so big?

Yet another demand factor arises from investors who want to put their money into a foreign country, requiring them to raise cash in the foreign currency. All of these requirements produce a need for foreign exchange and contribute to the vast size of foreign exchange markets.