Today, the foreign exchange markets are composed of two types of players. Speculators and markets with actual use for it. For example, a European company that wants to buy goods in dollars and therefore trades money for dollars.
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The strength of the currency will depend on the health of the country's economy and how much this currency is actually being demanded.
If the health of the economy is good, that is, gdp growth is 3% to 5% for an advanced economy and inflation under control, debt levels are manageable, employment is high, productivity. Then people want to invest in a country.
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This way and therefore buy this currency. Speculators will also buy this currency. The interest rate view or the inflation outlook also allows speculators to buy or sell a currency.
For example, if the inflation rises, if the real return is negative, people will sell that currency and receive a more promising currency.
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