Exchange Rate Tracker — Historical Trends

What actually moves an exchange rate

• Interest rate differentials —The dominant driver for major pairs. Capital flows toward higher real yields, so a central bank raising rates faster than its peers usually strengthens its currency. Markets price expected changes, not announced ones — which is why a rate rise that was fully anticipated often moves nothing.
• Inflation differentials —Higher relative inflation erodes purchasing power and, over long horizons, the currency. This is the basis of purchasing power parity, which holds poorly over months and reasonably over decades.
• Trade and current account balances —A persistent deficit means steady selling of the domestic currency to pay for imports.
• Risk sentiment —In a crisis, capital moves to perceived safety — the dollar, the yen and the Swiss franc typically strengthen regardless of their own fundamentals.
• Commodity prices —Currencies of large exporters track their principal export. CAD moves with oil, AUD with iron ore, NOK with gas.
• Central bank intervention —Some currencies are managed rather than floating. A rate that looks unusually stable is often stable by policy, and can move sharply when the policy changes.