Foreign Exchange Volume Growth
Let's talk about foreign exchange volume growth. The sensibility of the foreign exchange market is very high. Changes in the political environment, global trends, and speculation among other things, are rapidly reflected on the value of the currency at any given time. You can tell what is happening in the world by observing currencies.
Supply and demand are the name of the game.
The growth of foreign exchange trading depends on several factors:
- If a country has a deficit, the value of its currency drops.
- If a country has a trade surplus, the value of its currency rises.
- If a country has a high level of inflation, its currency loses value.
- If a country has a healthy economy (high employment, high retail sales, etc.), its currency gains value and, therefore, demand.
- If a country has high levels of instability, its currency loses value and it might affect the economy and the currency value of neighboring countries.
- Safe havens: A country with high stability and strong currency will have a high demand for it as it will be considered by investors as safe during global economic and/or political uncertainties. An example of this is the Swiss franc.
- Rumors: When the behaviour of the currencies reflects an imminent event, the demand rises in order to profit later on. This is called “buy the rumor, sell the fact”.
- "What to watch": Patterns and trends determine the demand. Employment, trade balance, and inflation are some examples of the numbers watched before making a currency trade decision.Speculation factors:
- Currency speculation does not enjoy of a good reputation in many countries. Some governments blame speculators for the devaluation of their currencies, while others consider it the responsible of economic recovery. One example of this is Malaysia, whose economy recovered quickly after doing the opposite of what the IMF suggested.
To continue learning about foreign exchange as a financial market, click on the link below.
Return from Foreign Exchange Volume Growth to Foreign Exchange Financial Market.
And to skip it and go straight to get a deeper sense of what forex is all about, click on the link below.
Return from Foreign Exchange Volume Growth to Foreign Exchange Center.