The gyrating currency rates are basically the rates that result from demand and supply rules. The foreign exchange market in which foreign currency rate is dependent upon these rates is constantly changing by these rules. And, therefore, it is the most vulnerable as well as the most slippery of markets in the world and therefore, supply demand rules are governed not by just one factor, but rather many factors. Three major factors include: socio-political conditions, economic conditions and mass psychology. It is these three elements that define higher or lower foreign currency rate at a given time in foreign exchange market.
Talking about market psychology, it is the most difficult element to catch and understand as mass psychology is very complex thing to infer. For example, it is sometimes affected by the rumor of any type. This type of behavior is often described as buy the rumor, sell the fact. People blindly believe in what which is not there and ignore that which is already there. Foreign currency rate and currency rates are also influenced by international events of grave concerns. For example, events like Tsunami that recently hit Japan. During this time, the value of the Yen went down considerably as investors felt very insecure and resorted to a safer currency. In this situation, currency rates work on the principal of supply and demand rules. The demand goes down and therefore value too goes down. If the rates are affected by rumors, they also work under the influence of long term trends. Unlike commodities, currency rates are unseasonal, and therefore, seasoned analysts do make their judgments based on long-term economic and political trends.
Demand and supply rules also include economic numbers that are comprised of money supply, employment, trade balance figures and inflation numbers. Now-a-days, these numbers affect a great deal on the psyche of the market place and they immediately impact currency rates and thereby foreign currency rate.
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