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Forex and Exchange Rates

In: Business and Management

Submitted By tytyusa
Words 764
Pages 4
Taynan Ramos
International Economics
Professor Nicole Soto
02/15/15
Exchange Rates
With regard to currencies, exchange rates, as well as any other price, are determined by supply and demand. The supply and demand of currencies depends on many factors which can be grouped as follows: * the monetary system, which places the political structure in relation to exchange rates; * economic data as the trade balance, inflation and the national product. Fundamental analysis is based on the observation and evaluation of these economic data, as has been proved in the past, has influenced exchange rates. Taking into account these correlations optimal analysis can be done to give an indication of the long-term trend of exchange rates; * technical factors. historical rate fluctuations and volumes are examined and analyzed. Some models, which are expected to repeat themselves over time, can be used as a predictive criterion for short-term trends (technical analysis); * expectations. activities of financial operators are not the only based on known economic data, but also on their expectations of future trends; * political events / psychological factors, such as elections, political tensions, etc.
Fundamental analysis is based on the study of the economy. It is based on the assumption that the supply and demand of currencies is the result of economic processes that can be observed in practice and can be predictable. Fundamental analysis studies the relationship between the evolution of exchange rates and economic indicators, a relationship that exists and is used to make predictions. Up to this point, none of the theories views ahead serves all the exchange rate forecast requirements. This is why there are many factors of parallel evaluation, valid for part of the study area, but can also be mutually exclusive.
Analysis of the balance of payments
This

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