Forex Leverage Interest Rate

Interest rates or interest rates are a very important component in the world of forex, this applies to forex market moves due to interest rates or interest rates in the currency traded.

The interest rate itself is the main factor in determining the price of a currency, by seeking detailed information on how a central bank determines its monetary policy, including how they rise or descend interest rates correctly where prices will move.

What must be understood is the decision of the central bank to change the interest rate is to see the price stabulity on the market or commonly called inflation. Where inflation itself is an increase in price prices associated with goods and services that are widely consumed by the public.


An example of inflation is, in 1990 the price of one liter of gasoline was in the range of Rp. 500 and now people have to pay Rp. 6,500 for one liter of gasoline.

Inflation is inevitable, but can be controlled. When an inflation moves to remember but not too high or can be said to be controlled in its rise then inflation is still said to be stable and increase the rate of economic growth.

The inevitable fact is, if the inflation rate is too high and can harm the economy will make the market become more lethargic and to pour people's purchasing power away from the level that should be. This is why the central bank should maintain some important economic indicators such as the Customer Price Index (CPI) and the Producer Price Index (PPI).

The central bank considers inflation to be safe when interest rates are at safe levels, but when the central bank should keep its inflation at a safe level, the central bank should raise its interest rate so that economic growth becomes much more stable. In this way the inflation rate will become more stable and begin to slow down.

When interest rates begin to fall, consumer credit will tend to increase, this is because the interest paid will be much less and can increase capital. That way the economy will be much better.

RELATIONSHIP BETWEEN INTEREST RATE AND FOREX ACTIVITIES


The activity of buying and selling currency in the forex market is closely related to the interest rate, since the currency moves according to the interest rate issued by the central bank. This then triggers the flow of global economic flows (flow of global capital) either into or out.

Interest rates can make investors' attention switch, for example investors are interested in doing their business in country A, but in country B offers a much more attractive interest rate then investors can move from country A to country B. If in more examples Small, a bank customer will be interested in saving in a bank offering bigger and better interest rates than in a bank with low interest rates.

The higher the interest rate in a country then the country's currency will be increasingly in demand and the higher the interest rate then the stronger also their currency.

It also applies to the contrary, low interest rates will make the country shunned by investors, this is because the currency will decline.

EXPECTATION OF INTEREST RATE


Situations and events make market conditions change constantly until finally directly create interest rates to change along. Many of the market participants are focused on the current interest rate and future interest rates so they can anticipate market changes.

Because by knowing the interest rate then monetary policy of a country will be read and this is very important for fundamental analysis especially at the end of period of monetary cycle.

So when you find the market moving unclear ahead of the announcement of interest rates, then you should not rush to enter into the market. Because what you find inside is just a bunch of speculators you can not grasp the truth.

All you have to do is be quiet and watch, wait until the interest rate report is really release and that is when you do the action.

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