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Prices of currencies.


      Prices of Currencies Do fluctuate. There will always be price movements in any market. Some of these price movements are driven by the government which attempts to intervene to control currency values. This intervention is usually necessary as a way to stop a particular currency from rapidly declining or increasing. For example, if the government discovered that a certain country was dumping large amounts of aluminum in the international market, it would attempt to intervene to limit the amount that was being purchased and sold.
     Changes in Supply and Demand Cause Changes in Prices of Currencies When there is a sudden increase in the demand for goods a particular nation then the value of that nation's currency usually decreases. On the opposite side, when there is a sudden decrease in the supply of goods a nation then the value of that nation's currency typically increases. Because most traders use the US dollar as their trading currency, there is a very high level of volatility in the Swiss Franc since most trading occurs in US Dollars. These fluctuations cause extremely fast fluctuations in prices of Currencies. In addition, currency prices are affected by many other factors such as political events, inflation, globalization, business cycles, and other similar things.
     International Trade and Foreign Currency Fluctuations The interaction between two countries leads to the movement of their currencies and therefore international trade and foreign currency fluctuations are unavoidable. Nations all over the world to trade with one another. Most traders focus on the movement of one country's currency to another but they also have an effect on the prices of other foreign currencies. International trade and foreign currency fluctuations happen daily and therefore most traders do not have any control over them. However, they can be easily manipulated if you know how to do it.
     Relative Price Information There are two types of factors that cause relative prices of currencies; these are demand and supply. When you look at the supply and demand side of the exchange rate then the more of the currency that is being purchased by a country's consumers the higher the exchange rates will tend to be. On the other hand, when you look at the relative price information then this tends to vary depending on the supply and demand aspects. For instance the oil export dependency of a country influences its relative prices of oil.
     Capital Flows One of the biggest causes for trade and currency movements is capital flows into and out of particular countries. When you look at the capital flows into and out of Switzerland in recent years, you can see that the Swiss economy depends on foreign investments to support its continued growth. If you look at the trends in other countries that trade currencies then you can see that they tend to follow capital flows into and out of the country.
     Central Bank intervention The last thing you want to see when you are trading on the currency market is a concerted effort from the central bank of a country to stabilize the trade or move the exchange rates up or down. Most often than not the intervention is designed to increase demand in the market and to increase liquidity so that trades can be processed with minimal long term losses. The intervention usually takes the form of an interest rate hike, which drives up the cost of the currency of one country relative to another but this ultimately ends up hurting the domestic economy of the country doing the intervention.
     Liquidity and Volatility Last, but not least, it is important to understand the liquidity and volatility of the currency market. In most cases, when people trade on the exchange markets they are speculators and not meant to have any sort of fixed or clear knowledge of the underlying assets or commodities. Most of the time, what you see is what you get as far as liquidity and volatility. Speculators or short term traders on the currency market will often times trade with a very narrow focus on the currencies being traded. They are looking for signals that they can use to make a profit.
     If you are a speculator, you have likely heard the saying, "The trend is your friend" and this certainly applies to the foreign currency markets. Trading the Swiss franc tends to give you plenty of time to analyze the charts and make educated guesses about where the prices of currencies might go before they decide to trade. It is a low risk strategy but one that carry significant downside if the Swiss franc drops significantly because of a sudden change in policy by the central bank. Also, you need to remember that, much like stocks, currency rates are highly influenced by governmental policies. Actions by governments around the world can significantly impact the strength or weakness of the Swiss Franc and this can create huge short term price fluctuations that can be hard to control.

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