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April 14th - According to a CNN report on Monday, a source familiar with the negotiations revealed that the Trump administration is discussing the specific details of arranging a second round of face-to-face talks with Iranian officials before the US-Iran ceasefire expires next week, depending on the situation. However, whether such a meeting will actually take place remains uncertain. If negotiations with Iran and regional mediators progress in the coming days, officials are studying potential dates and locations for the talks, describing these discussions as an initial phase. "If the situation develops in that direction, we need to be prepared to quickly initiate the relevant arrangements," the source said. A regional source indicated that a new round of negotiations is possible, with Turkey working to bridge the differences between the two sides. Sources familiar with the matter revealed that Geneva and Islamabad have again been listed as potential locations for the next round of negotiations. Sources said that government officials remain hopeful of resolving the issue through diplomatic means. Depending on the pace of progress in negotiations in the coming days, the US and Iran may also extend the ceasefire to buy more time.On April 14th, Bank of England Governor Andrew Bailey warned on Monday that private credit funds are facing a higher risk from a one-off shock that could shake confidence across the industry. In his capacity as Chairman of the Financial Stability Board (FSB), Bailey wrote to finance ministers outlining how the Middle East conflict could, for the first time, test the $1.8 trillion global private credit market, as some highly leveraged borrowers face pressure. Bailey wrote, “The lack of transparency in these markets presents a higher risk, and even if the specific cause of the problem is limited to individual borrowers, it could trigger a broader loss of confidence.” He added that the FSB will “continue to monitor and conduct further work in the coming months.” The FSB is currently preparing a detailed report on private credit vulnerabilities, aiming to uncover hidden corners of the market that policymakers have been concerned about for years, an area that has expanded rapidly in a relatively lax regulatory environment.According to Futures News on April 14, as of the close of trading at 2:30 PM, the main Shanghai Gold futures contract fell by 0.48%, the main Shanghai Silver futures contract fell by 0.19%, and the main SC crude oil futures contract rose by 0.65%.April 14th - As of 2:30 PM closing, the Shanghai Gold futures contract fell 0.48% to 1043 yuan/gram, the Shanghai Silver futures contract fell 0.19% to 18632 yuan/kilogram, and the SC Crude Oil futures contract rose 0.65% to 653 yuan/barrel.According to Politico: The U.S. Senate Banking Committee has received Warshs ethics filings but is still awaiting his responses to the questionnaire.

What factors cause a currency to appreciate?

Eden

Oct 25, 2021 13:27

Forex traders buy or ‘go long' on a currency pair in the hope that the base currency will appreciate relative to the quote currency. To understand currency appreciation, we should briefly look at the intricacies of a currency pair.

A currency pair is made up of a base currency and a quote currency. The base is always worth one, and the quote represents how many of that currency you would need to sell in order to buy one of the base currency.

For example, if the pair was EUR/USD, the euro is the base currency and the US dollar is the quote. If the quote price was 1.25, it means that you would have to spend 1.25 dollars in order to buy one euro.

Example of currency appreciation

A forex trader might take a long position on EUR/USD if it started to cost more dollars to buy one euro. In the above example, if the quote price increased from 1.25 to 1.50, it would be said that the euro has appreciated in value next to the dollar, since it now costs more dollars to buy the same number of euros as before.

What factors cause a currency to appreciate?

There are several factors which can cause a currency to appreciate. Two of the most important are:

Inflation and interest rates

Lower inflation rates typically mean that a currency’s value will appreciate relative to other currencies with higher inflation rates. This is because lower inflation rates cause interest rates to rise. A higher interest rate will attract more foreign investment in a country which in turn increases the demand for its currency. While this often causes the currency to appreciate, it is not always so finely cut.

Investor sentiment

Currencies can also appreciate depending on how ‘safe’ investors view the country's central bank and government.

For example, Switzerland has long been considered a safe haven for investors, which means the currency appreciates in times of economic crisis. This is because of its historic neutrality in wars and tendency towards political stability and relatively free monetary policy; as well as its openness to foreign investment. These policies have made the Swiss franc one of the most heavily-traded currencies in the world.

Investor sentiment heavily influences the supply and demand for a currency on the open market, which are perhaps the largest drivers behind whether a currency appreciates or depreciates. The currencies which are most susceptible to influence by supply and demand are those that operate on a floating exchange rate.


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