While trade is international, currencies are national. As international transactions are settled in global currencies, usually they are brought/sold for one another and this constitutes 'currency trading.Currency trading is one of the most fascinating and potentially lucrative businesses. It does not involve rocket science but yields incredible profits. A few years ago FOREX (foreign exchange) was not known to many people but today it is one of the most attractive home business opportunities for any person mainly due to its availability via the internet.
Currency prices are affected by a variety of economic and political conditions, but probably the most important are interest rates, international trade, inflation, and political stability. Sometimes governments actually participate in the foreign exchange market to influence the value of their currencies. They do this either by flooding the market with their domestic currency in an attempt to lower the price or, conversely, buying in order to raise the price. This is known as central bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the FOREX market make it impossible for any one entity to drive the market for any length of time.
Major fundamental factors that affect currency movements
Trade Balance - This refers to imports and exports, and is probably the most important determinant of a currency's value. When imports are greater than exports, you have a trade deficit. When exports are greater than imports, you have a surplus. A shift in the trade balance between two countries tends to weaken the currency of the country with greater deficit