What are the key factors that influence exchange rates in the long term?

Important to consider is that it is primarily the 'expectations' on the evolution of interest rates and inflation that ultimately impact exchange rates, being that the financial markets are motivated by future performance. The yield curve on government bonds is a key indicator to evaluate the perception of the market regarding the term structure of the interest rates, which also brings information about inflation expectations.

So spot on, majorly inflation and or interest rate. Very well, articulated. Furthermore, countries that have a huge employee band outside of their borders can have intermittent moments when the diaspora employee band remits lots of other currencies back home. This drives a higher appetite for the local currencies in view of the influx of incoming foreign currencies which affects the exchange rate against the local currency.

In the recent times , it's become apparent that geopolitical tensions and trade spats among influential economies and fiscal actions by these leading economies can can easily affect the inflation and interest rates of third world countries irrespective of their economic standing. The increase in rates by fed and other European countries has seen flight of capital from third world economies seen as more risky to get higher returns in these developed countries exerting more pressure in local currencies.

Agree,but in the other side we will have a slow growth rate which makes a new scenario reflectively for all world.. We already began on this from 3 years..

One thing i want to add is when there is a unfavourable balance of trade between two parties it tends to affect exchange in the long run.

The exception is the United States, which is a strong currency even though the country has a massive trade deficit. That's because the mighty US dollar is seen as the World's reserve currency. It's used to buy and sell goods which don't even touch the US. The world's trade in oil is a significant example.

In my opinion, exchange rates are also influenced by the balance of receipts and payments of an economy. The bigger the deficit or surplus, the bigger is the impact. Imports and exports can largely be affected by the balance of payments.

The trade balance of countries can affect the exchange rate in the long term, but a decrease in the exchange rate cannot be expected in an importing country. When foreign currency is constantly transferred to different countries, it triggers a current account deficit in this country. Even if it grows commercially, it may have a deficit in the current balance. Therefore, we come back to what I first said: The first priority in a country is to support production and strengthen exports to establish trade balance.

The exchange rate is the price of a currency in terms of another. Economic growth and productivity are crucial elements in determining the level of the exchange rate in the long run, however, these determinants work through the external sector, meaning that their importance is proportional to the level of integration of an economy to the international markets and global trade. The more integrated an economy is to the world economy, the more important its economic performance will become for exchange rate determination (and vice versa).

I would say in long term, Good projected growth rate and development will have a strengthen the currency. Many countries would want to increase currency deposits of the high growing countries as compared low-growth countries. This is not the only factor impacting the currency exchange, this coupled with other factors discussed in the article will influence the future of a currency.

During times of global uncertainty, investors may seek safe-haven currencies, impacting exchange rates. Perception of a currency as a safe haven can influence its long-term value.

Economic growth is not measured only by the country's exports and imports; the purchasing power of the people, inflation affecting sales prices, the value of the currency and many other factors can lead to these. Unfortunately, every country that exhibits economic growth does not mean that it has improved the situation. There are many countries that have a lot of foreign debt but exhibit economic growth. USA, Türkiye etc. Many countries may grow economically, but their external debts are at very high levels. Although this shows that good business is being done, foreign borrowing causes a current account deficit. Generally, countries reflect this numerically, but absolutely none of the reflected figures correspond to reality.

Government policies are major determinate of a country exchange rate. These factors are influenced by so many factors most importantly the general economic situation of the country.

Politics has always had an impact on currencies. Even though the country's governments' behavior, words, common phrases and management style say that they are for the trust and welfare of the society, they only act by taking some measures to strengthen and develop economically large companies. Apart from the main reasons for currency movements that play an influential role within the country, political impulses, hostile attitudes and bilateral relations may cause serious exchange rate fluctuations. For this reason, I think Blockchain-based stable intellectual foundations should be created using technology.

A country with a stable government is always sought by businesses to flourish. A stable government and supportive institutional policies will encourage foreign investments which will strengthen the exchange rate.

Politics has always had an impact on currencies. Even though the country's governments' behavior, words, common phrases and management style say that they are for the trust and welfare of the society, they only act by taking some measures to strengthen and develop economically large companies. Apart from the main reasons for currency movements that play an influential role within the country, political impulses, hostile attitudes and bilateral relations may cause serious exchange rate fluctuations. For this reason, I think Blockchain-based stable intellectual foundations should be created using technology.

Political allies or the number of countries using your currency or accepting your currency will also impact the exchange rate.

The flow of capital is the driving force in exchange rate dynamics for both the short and the long run scenarios, while in the short run inflation and interest rates expectations are primarily responsible for inflows and outflows of capital, in the long run institutional factors play a more decisive role, manifested in the form of an open and stable capital account, credible monetary policies and the strenght and integration of the domestic financial institutions with the main international financial centres.

Further points may be added like, Trade policy of the Govt. which is closely related with fiscal policy. As a prominent fiscal policy will initiate to decrease trade deficiency and positive trade policy will promote more export than import. It will make new policies to eradicate trade barriers and negotiate to have more entries to the world, thus contributing to the positive growth of BOP.

Broad & Global crisis & recessions : countries search for financial protection in strong currencies s.a. dollars that affect the “countries balance sheets” with significant flow of money moving into other countries and assets e.g., gold). Undeveloped countries trend to suffer more.

Os principais fatores que influenciam as taxas de cambio no longo prazo incluem políticas econ?micas, taxas de juros, balan?a comercial, estabilidade política, níveis de endividamento e tendências macroecon?micas. Mudan?as nessas variáveis afetam a oferta e a demanda por uma moeda, impactando suas taxas de cambio.