Financial Knowledge

The main factors influencing the fluctuation of foreign exchange rate

June 17, 2020

Another important factor affecting foreign exchange rate is political factor. Although the economic cycle is unpredictable in time and amplitude, it has been fully considered and applied in organizational life. In some countries, such as the United States, political factors are fixed, such as the determination of election day is not subject to change. But in other countries, such as the UK, the political cycle is relatively flexible, and the government has the right to choose the specific election schedule before the latest election deadline. Economic factor is one of the most important factors that speculators consider. Therefore, when the day of speculation approaches, the government always tries to make full use of the factors that can win the favor of voters, such as the rise of income and the decline of unemployment.

The intervention may be either oral or practical. Oral intervention is only in the form of statements (statements) made by the authorities to influence the value of a certain heavy currency. The actual intervention refers to the use of xauusd reserves and foreign exchange reserves by the authorities to purchase the domestic currency and increase its value by increasing the demand for the domestic currency. However, because xauusd and foreign exchange reserves are limited, unrestricted intervention or support of a currency will inevitably lead to the exhaustion of xauusd and foreign exchange reserves, so this kind of intervention is impossible to continue indefinitely.

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