What causes fluctuations in currency exchange rates?

Answer 1

ultimately, the financial and political health of the country or community it comes from.

trade deficit, trade surplus, GDP, PPP, etc.

The transaction demand for money is highly correlated to the country's level of business activity, gross domestic product (GDP), and employment levels. The more people there are out of work, the less the public as a whole will spend on goods and services.

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A currency will tend to lose value, relative to other currencies, if the country's level of inflation is relatively higher, if the country's level of output is expected to decline, or if a country is troubled by political uncertainty. For example, when Russian President Vladimir Putin dismissed his Government on February 24, 2004, the price of the ruble dropped.

Answer 2

In the short term:

Variation in supply and demand. There are some very big players (mostly investment banks), which do a lot of the trading. They can have some influence on the supply and demand due to the market makers holding a position.

Over the long term:

The purchasing power parity path is most commonly quoted as the path that a rate of exchange will take.

Other factors:

Restrictive markets (eg. India has limits on what trading can be done with its currency, and is very restrictive on tourist buying and selling of currency)

Political influence: Governments and central banks can manipulate a currency by buying and selling in order to maintain a certain level.

Confidence: A lack of confidence in a Government regime can have serious damage to a currency. A currency can remain strong against the odds due to an over confidence in a Government regime. Confidence in a currency can be maintained by pursuing stable economic policies (such as making the Bank of England independent of Government control outside of the Governments stated monetary policy)

Answer 3

I believe it is the buying and seklling of goods and services from aroad ( regardless which country you are in ) and thi stock market levels of the the country of the currency . elasticity of supply and demand will not affect this as it is not a comoddity you buy , as a consumer every day , like the effect tabacco has on taxes ., ie : people always buy them whatever the price , whereas you always need currency for going abroad .
TIP ; going abroad ? take your maestro/ switch or what ever and use an ATM , no comission no cash carrying in large amounts , no cheques etc .

Answer 4

Your ma!!!!!

haha sorry couldnt resist!

But the answer to that is a whole heap of economic factors, and its far too much for me too type, sorry!

You may find your answer here...

Answer 5

i think it's beans. oh wait I thought you said flatulations.. never mind