Which is the importance of the evolution of the foreign currencies?. Considering that you are in a market that is based on the purchase and sale of foreign currencies, the evolution of these is the first that you have to consider. The evolution of the exchange rates can be a fundamental factor when planning investment strategies.
In Forex the dollar, euro, yen, pound and Swiss franc are commercialised, these currencies have the support of the strongest economies of the world and that’s why this is an advantage of which you should take advantage when doing an investment.
The evolution of foreign currencies depends on many factors that have to do with the situation that influences the cyclical movements of the value of the foreign currency. I will mention an example to explain what I have said ’till this moment.
The euro was introduced in Europe in 1999 after a year of stability of the markets of Europe. During the first years the currency reduced its value because of many cyclical factors of the market economy, anyway, in those days noone imagined the evolution that the Euro would have after seven years of life.
The evolution of the euro produced a revolution at the monetary market as during the first months it provoked a great demand turning to be over the dollar. After a growing period the evolution of the foreign currency euro falled because of the low growing rates of the European economy and of the high levels of unemployment that were registered.
Nowadays, after seven years from the moment that europe adopted the euro as a unique currency, the situation has changed, as the stability of these nations has made that the evolution of these foreign currencies become favorable and continue raising in front of the dollar.
What I really would like to explain with this example is that, analise the international situation is a very useful mechanism to see the evolution of the foreign currencies. The variation in gold prices, crude or the economic indicators of the principal economies of the world can be a vital tool to have a profitable investment.

No country in the world is self-sufficient, and so everyone tries to commerce at the market goods and services that are necessary for the working of each economy. Those exchanges of elaborated products, raw materials or goods and services are transactions that are done in foreign currencies. Transactions in foreign currencies must be done using the exchange rate that used at the bank market at the moment that those operations are done. Transactions in foreign currencies are included in the perfect market as the supply and demand law works to determine the price or “exchange rate” for all the currencies around the world, so the demand is greater than the supply, the price raises, and vice versa, if the supply exceeds the demand, the price falls. One of the principal problems that transactions in foreign currencies carry out is that they must be done in a common currency among the involved countries. As in the definition is included the idea of a national currency, while doing a purchase or sale of goods we should determine the exchange rate of one currency to the other. Most commercial operations must be done with transactions in foreign currency and the major part is done in dollars so many countries are interested only for the relation between the value of the domestic currency and the value of the dollar. Today in Latinamerica there is a project between the countries members of the MERCOSUR (Common Market of the South), to eliminate the transactions in foreign currency and carry them out with a regional currency, everything is still being discussed but it is an initiative that would improve the commercial relations amoung the Latinamerican countries.

Why is the purchase and sell of foreign currencies a profitable business and what factors influence on the quotations changes?. Today in the foreign currencies market there is a great volatility because of the raise of the crude price and the weakness of the dollar.
One of the person that has predicted what will happen with the crude price in 2008 was Ahmed Kaki Llaman, ex president of the OPEP (Organization od Crude Exporters Countries), who said that next year the barril price could be reduced until 75 dollars, according to Llaman this will depend on the evolution of the economy of the United States and the decision that takes the OPEP on its meeting of the 5th December in Abu Dhabi. It is important to remind that some days ago the proposal made by Venezuela was rejected and supported by Ecuador that has as an aim exchange the dollar per the euro for the crude purchase.
In front of this scenario the traders of the forex market try to do a more intuitive interpretation. A growing of the volatility in the long term is signal that the direction of the pair is strong, while a low of this, shows that the pair will float. The most experienced traders have shown that the most effective formula in the purchase and sale of foreign currencies is to continue with the direction of the pair rather than speculating about the trend as it can take some problems.
Every future decision will influence on the liquidity of the market, in the force in the future of some foreign currencies and the weakness of others, and above all, it will have a great incidence on the purchase and sale of foreign currencies. The foreign currencies market make us live with this constant changes and is our must to be able to carry them out on the best way to be able to take advantage of the situation.