<P> 4 . Whether there including inflation (1) nominal exchange rate: an exchange rate that is officially announced or marketed which does not consider inflation . (2) Real exchange rate: The nominal exchange rate eliminating inflation </P> <P> 1. Balance of payments When a country has a large international balance of payments deficit or trade deficit, it means that its foreign exchange earnings are less than foreign exchange expenditures and its demand for foreign exchange exceeds its supply, so its foreign exchange rate rises, and its currency depreciates . </P> <P> 2. Interest rate level Interest rates are the cost and profit of borrowing capital . When a country raises its interest rate or its domestic interest rate is higher than the foreign interest rate, it will cause capital inflow, thereby increasing the demand for domestic currency, allowing the currency to appreciate and the foreign exchange depreciate . </P> <P> 3. Inflation factor The inflation rate of a country rises, the purchasing power of money declines, the paper currency depreciates internally, and then the foreign currency appreciates . If both countries have inflation, the currencies of countries with high inflation will depreciate against those with low inflation . The latter is a relative revaluation of the former . </P>

Exchange rates are determined by supply and demand