Factors influencing the main currency of the world – the US dollar
As statistics show, the main turnover of financial transactions in the Forex market takes place in US dollars. Why? Is it really that important for trading? Let’s take a look at the factors that create such a trend, and why they arose.
Interest rate on federal funds.
It is this parameter that has a significant impact on the currency in which trades are held. What is this bet? It is on it that enterprises lend each other funds. It can change, like everything related to money. And these changes affect the financial market.
Discount rate
This rate applies to commercial banks if it is necessary to replenish liquid resources. And although it has a more symbolic meaning, it has an impact on the financial market and the direction of movement on it.
Long-term bonds (30 years maturity)
Indicator bonds, which have a maturity of 30 years, are one of the main factors affecting the financial market. Why?
Yes, in fact, everything is simple. The fact is that bonds are valuable in the sense that the main role is played not by their price, but by their value. That is, profitability. And it has an inverse relationship with the price at maturity. And an increase in yields can reduce the dollar. Although we are not talking about a direct relationship, the trend is quite clear. Also, with an increase in inflation, as a rule, bonds begin to sell, which, in turn, can adversely affect the dollar exchange rate.
To date, the number of bonds with a maturity of 30 years is decreasing, the number of bonds with a maturity of 10 years is growing. But their impact on the dollar exchange rate is not too different from indicator bonds.
The yield on long-term bonds depends on trends in the global market. For example, a financial or political crisis in developing countries can lead to an increase in the dollar, as the value of US securities will increase due to the increase in their stability.
Three-month dollar deposits outside the U.S.
Everything is simple here. If people living outside the U.S. invest in dollars, the dollar will rise against not only the local currency, but also in the global financial market. If deposits are made in local currency, the dollar exchange rate will decrease accordingly.
Ten-year bonds
In this case, we mean bonds in US dollars. If the difference in prices for bonds in national currency and US dollars is large, in favor of the latter, then the dollar exchange rate, respectively, will grow.
U.S. Federal Reserve Bank
This institution is quite independent in determining financial policy, it can also influence the directions in the financial market and the dollar exchange rate with its signals.
U.S. Federal Open Market Committee and U.S. Treasury
The Committee is responsible for making decisions in the field of finance, and also announces changes in the exchange rate of the national currency. The Treasury, on the other hand, publishes data on public debt and plans the budget. And although this institution does not play a role in financial policy, however, in view of its activities, the impact of its statements on the US dollar exchange rate is enormous.
A significant impact on the dollar exchange rate is exerted by the country’s economic data, such as the level of employment, the ratio of earnings and prices, the production level, the volume of housing construction and other factors affecting the economy and characterizing its condition.
The direct impact on the dollar exchange rate is influenced by the industry index, which includes company revenues (actual and projected), the interest rate and its projected value, global events affecting the economy both around the world and in the United States in particular.
Also, sometimes the dollar exchange rate can be affected by changes in the exchange rate of other currencies. And it is not at all necessary that the dollar appears in the currency pair. For example, a change in the ruble exchange rate against the euro is likely to affect the dollar exchange rate. Thus, the strengthening of the euro will lead to a fall in the dollar exchange rate and vice versa.
Knowing all these factors, or even some of them, we will be able to correctly predict the direction of movement of the dollar exchange rate and properly plan our financial activities.
Binary Options Broker Promotions : BONUSES AND PROMOTIONS
Tagged with: Binary Options Academy
