Why do currency values change?

Why do currency values change?

Currency trading is the selling and buying of one currency against another. This trading takes place in the Forex market (Foreign Exchange Market), and it is one of the most powerful influences on the global market with multi trillion dollars being exchange back and forth on a daily basis.

Currency values are constantly changing, which is what makes Forex trading risky, the main reasons currency values change is due to news releases, political, economic or any form of big news which can have a big effect on investments around the world, or in specific places in the world, and change the value of certain or all currencies.

Another reason can be speculations, and that is when a large number of investors believe that a currency will be moving in a specific direction, and that causes them to make their trading decisions based on that expectations. So if they expect a currency to fall they create a bearish just by withdrawing their investments and allowing it to decline, making it a self-fulfilled prophecy.

Major international business flows can sway market movement, for example if the US are importing large quantities of products made in Europe, with will make them need to exchange US dollars with Euros to pay for the products, it will raise the value of the Euro against the US dollar. The same with any major movement between any two countries.

With so many factors influencing currency movements, the FX market is constantly volatile and movements are often unpredictable.