Why have the changes of the exchange rate occurred?
The changes in the exchange rate occur due to various factors and events that influence the supply and demand for a country's currency in the foreign exchange market. Here are some key factors that can impact exchange rates:
1. Interest Rates: Central banks often adjust interest rates to control inflation and stimulate economic growth. Higher interest rates attract foreign investors, increasing the demand for the domestic currency and causing it to appreciate.
2. Inflation: Countries with lower inflation rates generally experience an increase in the value of their currency. This is because their purchasing power increases relative to countries with higher inflation rates.
3. Economic Performance: A strong economic performance, characterized by high GDP growth, low unemployment, and stable fiscal policies, can attract foreign investors and lead to an appreciation of the currency.
4. Political Stability: Political instability, such as elections or geopolitical tensions, can negatively affect a country's currency. Uncertainty often leads to a decrease in foreign investment, causing the currency to depreciate.
5. Current Account Balance: The current account measures the balance of trade and net income flows. If a country imports more goods and services than it exports, it runs a current account deficit, which can put downward pressure on its currency.
6. Market Speculation: Investors, hedge funds, and financial institutions speculate on the future movements of exchange rates. Their actions in the foreign exchange market can cause fluctuations in exchange rates.
To understand the specific reasons for recent changes in the exchange rate, it is essential to analyze economic indicators, government policies, news events, and other factors that may have influenced the market sentiment. This can be done by consulting financial news sources, economic reports, and expert analysis.