Several factors can influence exchange rates, including:
1. Interest Rates: Higher interest rates offer lenders in an economy a better return relative to other countries. 2. Inflation Rates: Lower inflation typically leads to a stronger currency. 3. Economic Indicators: Data such as GDP, employment rates, and manufacturing output can impact currency values. 4. Political Stability: Countries with less risk for political turmoil are more attractive to foreign investors. 5. Market Speculation: Traders' perceptions can cause fluctuations in currency values.