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How are currency prices determined?

Factors affecting currency prices

Currency prices are affected by various economic and political conditions, most notably interest rates, inflation and political stability.

Governments sometimes participate in the forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price or buying in order to raise the price, known as Central Bank intervention.

Volatility

These factors, as well as large market orders, can cause high volatility in currency prices although the size and volume of the forex market makes it impossible for any one entity to "drive" the market for any length of time. 

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