More recently, in , the lira has been significantly depreciating due to geopolitical risks as a result of Turkey's policies in the Middle East and elsewhere. In October , the Lira sank to historic lows. It dropped beyond 8. Board of Governors of the Federal Reserve. Yahoo Finance.
NYB , Historical Data. XE Currency Charts. Department of the Treasury. Federal Reserve Bank of San Francisco. Peterson Institute for International Economics. Accessed Jan. Central Bank of the Republic of Turkey. Advanced Forex Trading Concepts. International Markets. Actively scan device characteristics for identification. Use precise geolocation data.
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Develop and improve products. List of Partners vendors. Your Money. Most of the world's currencies are bought and sold based on flexible exchange rates, meaning their prices fluctuate based on the supply and demand in the foreign exchange market.
A high demand for a currency or a shortage in its supply will cause an increase in price. A currency's supply and demand are tied to a number of intertwined factors including the country's monetary policy, the rate of inflation, and political and economic conditions.
One way a country may stimulate its economy is through its monetary policy. The money supply is the amount of a currency in circulation. As a country's money supply increases and the currency becomes more available, the price of borrowing the currency goes down. The interest rate is the price at which money can be borrowed. With a low interest rate, people and businesses are more willing and able to borrow money. As they continually spend this borrowed money, the economy grows. However, if there is too much money in the economy and the supply of goods and services does not increase accordingly, prices may begin to inflate.
Another variable that heavily influences the value of a currency is the inflation rate. The inflation rate is the rate at which the general price of goods and services are increasing. While a small amount of inflation indicates a healthy economy, too much of an increase can cause economic instability, which may ultimately lead to the currency's depreciation.
A country's inflation rate and interest rates heavily influence its economy. If the inflation rate gets too high, the central bank may counteract the problem by raising the interest rate. More specifically, some of the leading causes of currency depreciation are:.
Currency depreciation enables forex traders to profit, or causes them to lose, as the currency values fluctuate. If the price of the euro did fall, the position would incur a profit. But if the euro increased in value instead, they would suffer a loss.
If the trader had taken a long position instead, they would do so in the hope that the euro appreciated against the dollar. If the euro increased in price, they could close their position for a profit. Discover how to trade with IG Academy, using our series of interactive courses, webinars and seminars. Go to IG Academy. Compare features. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.
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