economic reports

The fluctuations in FX rates in a floating exchange rate regime are explained by the following theories:

1. International parity conditions
2. Balance of payments model 
3. Asset market model

None of the models that has been developed so far have achieved success to explain FX rates levels and volatility in the longer time frames. The above models make us understand that the exchange rates are affected by many macroeconomic factors and in the end currency prices are a result of dual forces of demand and supply.

For any given currency Supply and demand, and thus its value, are not influenced by any single element but rather than that they are influenced by several factors. These elements are generally divided into three categories:

1. economic factors,
2. political conditions
3. market psychology

Economic factors

The economic factors include:

• economic policy, that are disseminated by government agencies and central banks,
• economic conditions, that are generally elaborated through economic reports,
• and other economic indicators.

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