Dubai Forex Rates: What Are the Factors that Affect Forex Rates?

Interest rates considerably contribute to the principal value of currencies. High Dubai Forex rates attract foreign investment and this produce an increase in the external demand for a certain currency. The central banks have a large influence over these interest rates as they manipulate both inflation and exchange rates. When interest rates decrease however, the exchange rates tend to decrease as well.
Over the past years, the UAE has taken significant steps to encourage foreign trade relations. In April last year, the UAE started implementing an agreement with Ankara regarding tourism trade fairs and conferences. And just recently, its trade relationship with Turkey stood at $2.78 billion (10 billion AED) in 2010.

Foreign Trade and Dubai Forex Rates

There are several different aspects that play an important role in Forex trading. One of the first things that a trader considers before deciding whether to trade a particular pair is the Dubai Forex rates and global Forex rates. If you have even just a basic idea about how the foreign exchange works, then you probably know how quickly the prices fluctuate in the markets. But what exactly are the things that affect these prices? Well, there are several and all these are related to the trading relationship between two countries. Below are the following:

Interest Rates

Interest rates considerably contribute to the principal value of currencies. High Dubai Forex rates attract foreign investment and this produce an increase in the external demand for a certain currency. The central banks have a large influence over these interest rates as they manipulate both inflation and exchange rates. When interest rates decrease however, the exchange rates tend to decrease as well.

Employment Outlook

The employment levels in a particular country have an immediate impact on its economic growth. When the level of employment increases, people have more buying power as they have more money to spend. On the other hand, if unemployment increases, consumers' spending falls. An increase in unemployment levels indicates a plummet in the economy and possible devaluation of a country's currency.

Inflation

As a general rule, a country that consistently has a low inflation rate renders a rising currency value. In retail, more units of a certain currency are needed to buy certain commodities overseas. The countries with higher inflation rates generally see depreciation in their currency in comparison to the currencies of their trading partners.
 

Public Debt

Most countries engage in large scale financing in order to fund its public sector projects. However, while such ventures fuel their domestic economies, nations whose debts go out of control become unattractive to foreign investors. This is due to the fact that large debts have a high chance of inflation. And if the inflation rate is high, the debt will be serviced and ultimately paid off with cheaper real dollars in the future.

Political Stability and Economic Performance

The stability and economic performance of a country can attract foreign investors as they look for a stable country where they can invest their capital in. A thriving economy is more likely to gain a lot of investment funds than one that has more political and economic risk.

Conclusion:

The Dubai Forex rates and global Forex rates move very quickly and unpredictably. From the above mentioned factors, there are several more attributes that make up each of these factors. That is why its' highly important for any trader to view Forex trading from a large scope and scale down into the small, but equally important aspects. Moreover, while the Dubai exchange rates are determined by numerous complex factors, investors should also consider how currency values and exchange rates would play in the rate of return on their investments.

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