What Affects Currency Values?

Economic conditions

Econimic conditions includes factors such as jobs, unemployment, work ethic, infrastructure, inflation and direction of the economy. There are some economic indicators that detail a country’s economic performance.

1. Gross Domestic Product (GDP)
GDP is considered the broadest measure of a country’s economy, and it represents the total market value of all goods and services produced in a country during a given year.

2. Retail Sales
The retail-sales report measures the total receipts of all retail stores in a given country. It is particularly useful because it is a timely indicator of broad consumer spending patterns that is adjusted for seasonal variables. It can be used to predict the performance of more important lagging indicators, and to assess the immediate direction of an economy.

3. Industrial Production

Industrial Production shows the change in the production of factories, mines and utilities within a nation. It also reports their ‘capacity utilizations’. It is ideal for a nation to see an increase of production while being at its maximum or near maximum capacity utilization.

4. Consumer Price Index (CPI)

The CPI is a measure of the change in the prices of consumer goods across over 200 different categories.It can be used to see if a country is making or losing money on its products and services.

Political Conditions

Political Conditions includes the stability of the government, the amount of corruption, bribery and the degree of law and order. Also includes a country’s relationships with other countries and especially their relationship to US, UK, China and Russia. The form of government in the country is also a factor used to assess the value of a currency.

Demographics

A young population may mean better prospects for the future, people who are more open to change and development and a growing size of the workforce. The overall population of a country is a factor. How much weight does this country have on the world scene.

Natural Resources

The kind of and amount of exploitation of a country’s natural resources certainly helps create a perception of value, or lack thereof, of a country’s currency. Mining of minerals, forests, oil, fish and other resources are considered. Also the level of technology to development these resources.

In conclusion, currency values are determined by many factors. Not just one issue, but a composite of many must be considered.

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