Factors Causing Foreign Exchange Volume Growth

[mang_ncep]

 

The foreign exchange market is now considered to be the largest market in the world. The huge success of the market is down to the fact that it deals in the only asset in the world that possesses complete market liquidity: money.

The foreign exchange market deals essentially in the trading of currency, which means buying one currency by exchanging it for another. The value of currencies relative to each other is constantly fluctuating. It allows people to gain a profit by buying a currency during a period of stability and then selling it off if the value of the currency rises.

The dollar is often considered to be the most stable currency as the American dollar is known for its solidity and stability. However, this once highly regarded currency seems to be experiencing a downward trend. Several factors have resulted in the depreciation of the American dollar after an unexpected foreign exchange volume growth of currencies being exchanged in the market.

Recently, America has made certain economic and political moves that many countries considered to be hostile. In addition, America’s political strategies have had the opposite effect in certain countries where it was trying to gain political power. An example of this is America’s involvement in the lifting of sanctions against Iran. America’s under the table economic war against Iran has always been linked to nuclear weapons. The United States used its powerful economy and its status as the world’s major cultural exporter to leverage Iran’s abolition of its developing nuclear program.

The economic sanctions imposed by America and the other four permanent members of the UN security council (UK, France, Russia and China, as well as Germany) negatively affected the Iranian economy, which in turn resulted in massive depreciation of the Iranian currency, the Rial.

This resulted in the appearance of a unique trend among Iranians. They changed the Rials they possessed into dollars in order to retain the value of the money they had earned. However, recently the economic sanctions imposed upon Iran were lifted after Iran agreed to cancel its nuclear program. The result of this was a steady increase in the value of the Rial, so people who had invested in the American dollar converted their money back into Iranian Rials. As a consequence, there was a flurry of activity in the Foreign Exchange Market as the sudden overflow of dollars into the market began to undermine the value of the dollar.

Moreover, there are several middle eastern countries with strong currencies that were pegged to the dollar. This sudden depreciation of the dollar ended up creating a financial climate that forced

investors using these currencies to change to different currencies which further increased the volume of foreign exchange being conducted.

 

Source

[gds221]

In general, to understand all the factors that affect the work of a trader - you need to have experience. When I first started working with broker Amarkets, I also did not fully understand all the risks. Now the understanding has come.

[Vaabum]

It is unrealistic to take into account all factors, and it is important to understand if a trader wants to achieve success.