Blogs

Foreign exchange, which is alternatively called forex or FX, is one of the recommended means for trading. If done after meticulous studies and analysis, forex can bring matchless profits. As in the case of any investment sector, FX also has a few risk factors. Entering this sector should be done with the help of an expert only.

The fluctuations in the value of a currency vis-à-vis the other currency in the pair are what decide whether your investment would be in profit or loss. Here we are discussing five factors affecting the forex market in Dubai. Understanding them and monitoring them constantly is essential to preventing wrong moves.

Although mistakes or erroneous decisions do occur, they can be avoided through determinant actions, supported by an investment platform integrated with advanced technology. Expert support would be necessary for reducing losses and reaping the best benefit through FX.  

1.     Inflation

Inflation is one of the prime factors that affect the value of a currency. Hence, the partner currency would appreciate compared to the one from the country that has reported higher inflation. Inflation in a country depends on many elements, including the employment scenario, production, exports, and imports. Investors get an idea of the country’s financial condition by assessing the rate of inflation.

It is a fact that the value of a currency is inversely proportional to the rate of inflation. That means the value will depreciate with the rise in inflation. The purchasing power of the currency will come down with the increase in inflation and consequent elevation of interest rates.

The currency of a country with a low inflation rate will appreciate phenomenally. All the stable economies maintain a constant check on inflation and ensure a controlled scenario. It is in the country’s best interest to keep inflation within acceptable limits.

2.     Interest Rate

A method used by central banks to curb inflation is to increase interest rates. Even though both inflation and interest rates are independent of each other, they actually function together. The increased interest rate will offer better profitability to lenders. Thus leading to the value appreciation of the currency. Central banks worldwide use this as a common method whenever they find inflation going up.

At the same time, if the inflation rate is very high, the increase in interest rates may not have the intended result. An investor planning to trade forex should know that both an increase and decrease in interest rates could be beneficial. Many other relevant factors are also to be taken into consideration before reaching a productive decision regarding the investment.

3.     Market Speculation

This is a tricky element to monitor. Only market experts can predict or speculate. Even then, it is not confirmed that they would be correct 100 percent. Market speculation regarding the appreciation of a specific currency will create demand for it. Leading to an increase in value due to increased demand. However, the speculations can be wrong as well.

A brilliant forex investor should recognize the tide and play the cards carefully. He or she should invest at the right time and take a profit before the wave disappears. Forex trading has been witnessing such bandwagon effects.

4.    Political Scenario

The political situation, including changes in the government, elections, predictions regarding the election outcome, and the probability of new policies, can affect the value of a currency. FX investors predict the possible after-effects of the decisions and make the move accordingly.  

The concept of the new government being sworn in, the announcement of new policies, or a change in regulations can simply make a currency appreciate or depreciate. Those involved in forex trading constantly observe the political situations in both countries. And make a move based on the analysis.

5.     Economic Balance of the Country

A healthy country will have a well-balanced economy. It will have a controlled budget deficit, comparatively less debt, and enough sources to garner money. Uncontrolled expenses or maintaining a negative economy will simply impact the value of its currency.  Excess domestic currency supply is also a problem that creates the need to borrow money from other countries or the IMF.

As a result, the country will have to pay exorbitant prices for buying foreign goods or for importing goods. Every country tries to enhance domestic productivity, improve domestic sales, and export. The value of their currency will go drastically down if the country fails to do that effectively.

The Tail End

The forex market in Dubai is a highly preferred investment option. Investors need to study and invest in the right currency pair. Moreover, taking a profit at the right time is also essential. Minor losses may occur during the investment. Nevertheless, those should not affect the decision to continue with FX

What you need is an expert with in-depth knowledge of supporting forex trading in Dubai. Their meticulous guidance, directives regarding the investment, and proper advice regarding the prospects would be extremely useful for gaining the most from foreign exchange trading.

Seven Capitals assures you the best guidance and support for forex trading. We have a large client base garnered over the years. We have integrated automated systems, analytical tools, and advanced software solutions for undertaking analytical studies. With such innovative systems in place, we have been serving clients diligently since the initial days.

All those planning to join forex trading in Dubai may connect with us and start earning matchless profits. For more information, call us today.