Events Moves the Currency Markets

WHAT EVENTS MOVE THE CURRENCY MARKETS?     

          Traders need to be aware of several key elements and events that can cause currency values to move. For one, intervention plays a role in the currencies. When the Bank of Japan felt that its export business would suffer at the hand of an overvalued yen, it would intervene and sell yen to buy U.S. dollars. Countries like Canada and Australia, which produce raw commodities, saw a rise in their currency valuations as global demand increased for their goods and as their economies improved as well.

Foreign currency markets are mainly influenced by international trade flows and investment flows, which are the same factors that influence the equity and bond markets:

• Economic and political conditions.
• Interest rates, inflation, and political instability.

These factors have a long-term impact, which makes forex attractive to trade due to the long-term trending conditions established by central bank decisions based on these factors. Forex also offers investors some diversification necessary to protect against adverse movements in the equity and bond markets. Japan is closer to changing its zero-interest rule policy; and when it does, it may attract money back to Japan and boost its currency value.