Every country has their own form of money that used to exchange for basic commodities and services. The USA has the dollars, euro for European countries, and yen in Japan while yuan for the China. Each country can use their money to buy goods from others but it will be converted to its equivalent local value with the foreign currency. Such international market is called Foreign Exchange (FORex).
With the different currency used, its valuation is different from each other and varies depending on the country’s economy. The economy is the major driving force to the value of the currency of a country. While the economy is driven from the state of the businesses, export and import trading, and foreign investors entering to conduct business in the country. So before you enter forex, you must first understand your local economy.
Factors that Drive the Economy
Since the economy’s movement is one of the forex indicators, it is important to start off in learning the local financial market or the stock market. Since the local stock market is the main index for the evaluation of the local currency.
In the volatile and ever changing market conditions, it is crucial to determine factors that the affected price movement.
Local Businesses
The state of the local businesses is the key indications for price movement. If a company registered in the local stock exchange is prospering and investors are flocking to buy their stocks, the valuation of its stock price rises too. As the value of the stock increases, it helps support the margin index of the local stock market and hence, strengthen the valuation of the local currency.
Import and Export Trade
Some commodities are not available for in certain countries, hence, they import the goods from other countries. It is also viable to import if the supply is limited and there is a surge in the demand on the local market.
Countries with many exported goods and maintaining to supply their own, have a sector of the market that pushes for a stronger economic growth. Since it helps local farmers expand their business and selling of their goods in a stable and a competitive price.
The Government’s Economic Plans
The economical platforms by the government are a great foundation for a stable economy. By using the taxpayers money to develop sectors of the economy in a form of local projects that produce job opportunities. The government can also use such platforms to attract foreign investors to conduct business in the country. By giving an opportunity for the foreign investors to invest, it can boost the state of the markets because it can create competition against local businesses.