How is determined the currency exchange rate?
The prices of the currencies are influenced by a variety of economic and political factors, the most important of which are: interest rates, inflation, and political stability. The governments interfere sometimes in the currency markets with the purpose of manipulating their own currencies, through solid sales with the purpose of depreciating the respective currency, or in the opposite case through massive purchases with the purpose of making the currency more expensive. These interferences are called interventions of the Central Banks. Each one of these factors, as well as big individual market orders can cause strong volatility of the currency markets. The amount and the turnover of the Forex market, however, make its manipulation by one market participant impossible.
