As we all know that Forex is a biggest trading platform, which bound the complete market into one big global platform where countries from all around the world participate in the currency exchange hub through variety of trading modes with one common goal of acquiring best returns on investment.
With the vastness of the Forex market deliberately comes up variety of problems and even the small and the larger troubles have the force to influence the currencies and the entire market in few moments.
There are not just few factors that influence the market but there are list of issues, which shake the market taking it from the minor incidence of the bad weather or natural calamity to the biggest issue of political instability.
Because USD enjoys the position of funding currency so all the other countries trade fluctuates with the fluctuation in the USD as it is considered as the reference point for other countries and also all other nations look forward to USD in times of raising funds.
Interest Rates: Let s see how the interest rates effect the USD position at the forex trading platform. Interest rates influence the market generally in three ways.
• Interest Rate Hike: Increase in interest rates is profitable for the investors because this would strengthen the USD position in the market however, as far as the long-term investments are concerned the law of interest rate parity says that the currency valuations and rates should move in opposite directions and vice-versa. All the things at the Forex market are interlinked to each other in such manner that variation in one brings variations in other either directly or indirectly.
• Interest Rates of other countries: Without considering much about the US interest rates rise and drop the USD value depends on the way the USD manages to mound up to those of other nations. Like if the interest rates of USD declines then the investors may move to invest in other currencies rather then sticking to the USD for getting better returns on their investment.
• Interest Rates news and data releases: All the traders wish to be one step ahead of the investment this is the reason whenever ant news related to the interest rate increment or drop is released, USD value changes in reaction to the impending inflow or outflow of investments that are estimated to happen in the coming Forex sessions.
Therefore, it is not a matter of surprise if the value of USD changes sudden because there always exist some or other reason behind the variations. This is just a one factor discussed here but there are numerous that would be discussed in coming times. Until then stay connected to make Forex trades.