The forex market is essentially governed by the laws of supply and demand In terms of foreign currency, the terms strengthening and weakening; rising and falling are relative terms in the world of Forex. zChanges in currency values can have a dramatic impact on trade flows.
1. A stronger dollar will buy more units of foreign curency which may make a foreign vacation more atractive or the foreign stocks and bonds more affordable.
2. Although US consumers will benefit from a stronger dollar, US exporters will be hurt because US goods and services become more expensive to foreigners.
3. A weaker dollar means prices for US products and services will fall in foreign markets so they will buy more from the US and more foreign tourists and afford to visit.
These factors may contribute to a stronger currency:
*Higher interest rates in the home country than abroad
*Lower inflation rates
*A domestic trade surplus
*Political or Military unrest outside the home country
Watch this Forex Video
http://www.pinterest.com/pin/237213105347367558/
Click on this infographic
http://www.pinterest.com/pin/237213105347367549/
Visit this currency conversion site:
http://www.pinterest.com/pin/237213105347367553/
Investors use the FOREX market for four primary reasons:
1. Currency conversion
2. Currency hedging
3. Currency arbitrage
4. Currency speculation
There are spot rates and forward rates as discussed in Chapter 9.
