Forex is a short form of ‘Foreign Exchange’. It is related to the affair of currency exchange between two nations. It is calculated by taking into account the rate of currency exchanged between two countries. Now, forex market depends on a number of issues that pop out on a national and international level.
Though, multiple factors impact on the value of a certain currency, there are accurate and stable methods that help to evaluate the worth of a currency against another. That is exactly why international trade can move on in a smooth process.
The rate of export and import of a country with another country is of vital importance in determining the value of a currency. A country may undergo certain phases when it is importing more than exporting. That condition impacts on the value of its currency. For example, if a country suffers in its export of goods and service, this condition will devaluate its currency. And the same impact will spread its ripple through the international currency market.
Natural disaster can also cause to bring down the value of a particular currency. Immediately after natural disaster, no company tends to invest in that country. The country that faced the disaster itself suffers huge economic loss. And the resultant impact falls on trade and commerce. Naturally, it also hurts the value of the nation’s currency.
The change of political power may take significant role in escalating or diluting the value of a national currency. With the change of government and bureaucracy, national policy regarding international relation, trade and commerce also witness a significant change. Changes may occur on multi- dimensional levels. And the combined impact falls on the value of national currency market.
Forex market itself is not very volatile. If we observe the trend of a certain currency and keep a track record of its rise and fall, we see that it is more or less stable. But, the impact of other markets cause to the fluctuation of currency market or exchange rate of it. If stock market gets crushed, its impact falls on the currency of the country.