Spring Ramblings

It is to be noted that there are number of fundamental factors which cause fluctuations in the Forex market. On short term basis on many occasions these factors are found to be rather inactive unless the market condition has turned to fundaments. However, in the long run the Forex exchange rates of all the currencies are linked to fundamental causes. The fundamental factors are basic economic policies followed by the government in relation to inflation, balance of payment position, unemployment, capacity utilization, trends in import and trends in export etc, Normally other things remaining constant the currencies of the countries that follow sound economic policies will always be stronger. Similarly for the countries which are having balance of payment surplus, the Forex Broker exchange rates will always be favorable. Conversely for countries having balance of payment defecit the Forex exchange rate will be adverse. Continuous and ever growing deficit in balance of payment indicate over valuation of the currency concerned and the dis equilibrium created can be remedied through devaluation. Another important factor affecting the forex exchange rates is the political and the psychological factors. The political and the psychological factors are believed to have an increasing influence on exchange rates.