Fundamental factors, such as inflation, interest rates, balance of payments and government policies do not play much of a role in explaining short and long term fluctuations of a currency value.

Question

Quizplus · Accepted Answer

Fundamental factors can have a significant impact on short and long term fluctuations of a currency value. For example, higher inflation can lead to a decrease in the value of a currency, while higher interest rates can increase the value of a currency. Similarly, government policies such as trade policies and fiscal stimulus can also impact currency values.

Fundamental Factors, Such as Inflation, Interest Rates, Balance of Payments