First, the financial and economic situation.In the long run, the financial and economic conditions of a country are the basic factors affecting the foreign exchange rate of a country's currency.A country's fiscal balance and economic position are better than before.The amount of value represented by the country's currency will increase.The country's currency appreciates relative to foreign currencies;If a country's fiscal deficit grows or its economy deteriorates.The value represented by the country's currency then decreases, and the country's currency depreciates relative to the foreign currency.In general, fiscal and economic conditions have a relatively slow impact on the value of a national currency.

Second, balance of payments.The balance of payments is a comparison of the total amount of money a country receives against the total amount of money it pays to other countries.If the total money income is greater than the total expenditure.You have a balance of payments surplus.Otherwise, it is the balance of payments deficit.A country's balance of payments.In particular, the change of current items can have a direct impact on the exchange rate.When a country runs a balance of payments surplus.The foreign demand for the domestic currency increases, which causes the foreign exchange rate of the country's currency to rise.Conversely, when a country runs a balance of payments deficit.The exchange rate of the country's currency will fall.It should be noted that in the short term, the fluctuation of a country's exchange rate is not closely related to its international balance of payments.However, the trend of a country's balance of payments has a very direct, rapid and obvious impact on the foreign exchange market.

Third, the level of interest rates.Interest rates, as a fundamental reflection of a country's borrowing situation, play a decisive role in exchange rate fluctuations.The level of interest rates has a direct impact on international capital flows.There is a large amount of hot money in the international financial market.If interest rates in a country go up.May lead to the inflow of foreign capital, increase the demand for the domestic currency, thus causing the rise of the foreign exchange rate of the country's currency;If a country's interest rate falls, it causes capital to leave the country.Increasing demand for foreign currency, resulting in a decline in the foreign exchange rate of the country's currency.At the same time, according to the theory of interest rate parity, the difference between the two countries will have an impact on the expected rate of exchange rate change.And the change of the exchange rate will react to the flow of capital.This will affect the change of the exchange rate.

Fourth, inflation.In general, inflation leads to a decline in the exchange rate of a country's currency.A reduction in inflation will cause the exchange rate to rise.Inflation affects the value and purchasing power of a local currency.It will lead to the weakening of export competition and the increase of imports.It also has an effect on people's psychology.Thereby weakening the creditworthiness of the local currency in international markets.All this will lead to currency devaluation.It's important to note that the impact of inflation on exchange rates takes months to work through.However, the impact of inflation on exchange rate changes is more lasting.

Fifth, politics.Changes in national and international political situations.Will have an impact on the foreign exchange market.Changes in the political situation generally include political conflicts, military conflicts, elections and regime changes.Changes in the political situation can affect international economic transactions and capital flows, leading to changes in exchange rates.At present, the dollar still dominates the foreign exchange market. The general rule is: political crises outside the United States.Will push up the dollar exchange rate;If there is a political crisis in the United States.The dollar bore the brunt of the decline.The change of government election, the change of finance minister or central bank governor will also bring different degrees of impact on the expectation psychology of foreign exchange market, thus causing the change of exchange rate.It should be pointed out that politics can sometimes have a big impact on exchange rates.But the duration of influence is generally very short.