Interest Rates.

Interest Rates Are Perhaps The Single Most Important Indicator When It Comes To Determining a Currency's Long Term Value.In Fact , Most Other Economic Indicators Affect A Currency's Exchange Rate Because They Imply A Potential Change In Interest Rates.

Central Banks Usually Announce Interest Rates Every Month , With The Whole Forex Market Closely Watching To See What They Will Do.

By Adjusting Interest Rates , A Central Bank Can Control The Supply Of It's Currency , Directly Affecting It's Value.If Interest Rates Are Increased , It Becomes More Expensive To Borrow And More Attractive To Save,Causing The Amount Of Money In Circulation To Shrink As People Store More Money In The Banks.The Money Supply Is Thereby Reduced And As Lower Supply Causes Higher Prices The Domestic Currency Strengthens.

Conversely , If Interest Rates Are Cut , Borrowing From Banks Becomes Cheaper And Savings Become Less Attractive , Causing The Supply Of Money In Free Circulation To Increase , Resulting In Weaker Currency.

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