Determinants of exchange rates
The
following theories explain the impact of exchange rate
fluctuations on the floating exchange rate
system (in a fixed exchange rate system, prices, which are
determined by the Government):
International parity conditions:
buying international Fisher effect types purchasing
power of the effects of interest. Although previous
theories, to some extent, providea logical explanation of exchange
rate fluctuations, these theories, once controversial assumptions fail but [as the
free movement of services and capital
movements were] rarely true based on the real world.
Balance of
payments model: in this model, but focused
on were and services, without taking into account the
growing importance of global capital flows. He can
give no explanation in 1980 of the 20th century, the
value of the dollar further and 90 of the last
century, performances of the United States for most of the
increase.
The market model of
property: currency, as long as it is important to
build portfolios of asset classes. Asset prices are in
turn, depending on their expectations for the future value
of these assets largely ready to continue the current
level of activity. Model for the determination of the
exchange rate, what is capital markets a "bargaining
chip between the two is currency, the balance of the
price for supply and
demand after investments denominated in currencies".
None of the
models previously developed are able to declare the
currency and volatility over the long term. In the short term
(within two days), design algorithm to
predict prices. Refers to previous
models many macroeconomic factors on the exchange
rate and the cost of borrowing ultimately is the
result of two forces of supply and demand. The market can
be used as a great melting pot of the world: a
combination of factors of supply and demand than
another important
innovation and price second amendment. No other
market, including (and exaggerated) occurs more than
one currency in the world.
For a particular currency,
then its value, supply and demand through a single
item, but a small number are affected. These
elements are generally classified into three
categories: economic factors, political conditions and market
psychology.
Take currency trading
Due
to currency effects are having the
referee not insurable interest.
Trade, without any other
changes means Forex: investors borrow currencies
with low yields and lend (invest in) higher-yielding
currencies. Your opinion with the stability of the financial
world and currencies and units in use during
the global liquidity shortage, but
Forex is often blamed for the collapse of the value of
money and recognition.
-Risk arbitrage trading
is the exchange rate can be changed, investors pay
more expensive low value currency again. In
theory, under the guise of interest, no parity,
nopredictable profits should run because interest
rates between the two countries conforms to the plains
of Palacio should increase the rate of interest on
a very interesting difference in speed. But lend local
businesses of the operation to weaken the currency, because
investors sell the borrowed money by converting other
currencies.
Every year at the beginning
of 2007, it is estimated that in the United States could
bet $ 1 trillion yen carry trade. By the
mid 90, interest rates set by the Central Bank
ofJapan for Japan at a very low level to make
it profitable, financial assets borrowed yen for other
currencies. These activities include endangered mortgages in
the United States and the financing of emerging
countries, especially the BRIC countries andresource-rich
countries. The trade is largely fell Japanese
Yen in 2008, especially in votes.
Programme of quantitative
easing by the European Central Bank in
December 2015.Loosening of monetary
policy, low-capacity performance-currencies threatens
the euro the European Central Bank's investments. The
profit of the euro during the expansion of the market (such
as the falls of shares)
