" How Inflation Affects Currency and Interest Rates"Įuropean central bank. " Oil Prices, Exchange Rates and Interest Rates" 218 The euro as a reserve currency: a challenge to the pre-eminence of the US Dollar?"įederal Reserve Bank of Dallas. " The US dollar's hegemony as an international currency: a double-matrix analysis"īank for International Settlements. They can do this by buying or selling their own currency or foreign currencies.Īnnina Kaltenbrunner and Photis Lysandrou. Intervention by Central Banks: Central banks can intervene in the foreign exchange market to try to stabilize or devalue their currency.Speculation: If traders believe a currency will move in a certain direction, they will trade accordingly and may cause the currency to go up or go down.This can cause the currency to depreciate. Public Debt: Countries with high levels of public debt appear to be less attractive to foreign investors due to the high risk of default as well as the possibility of inflation. If a country exports more than its imports (trade surplus), its currency is expected to appreciate due to a higher demand from foreign entities purchasing its goods and services.
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