<P> The increasing volume of trading of financial assets (stocks and bonds) has required a rethink of its impact on exchange rates . Economic variables such as economic growth, inflation and productivity are no longer the only drivers of currency movements . The proportion of foreign exchange transactions stemming from cross border - trading of financial assets has dwarfed the extent of currency transactions generated from trading in goods and services . </P> <P> The asset market approach views currencies as asset prices traded in an efficient financial market . Consequently, currencies are increasingly demonstrating a strong correlation with other markets, particularly equities . </P> <P> Like the stock exchange, money can be made (or lost) on trading by investors and speculators in the foreign exchange market . Currencies can be traded at spot and foreign exchange options markets . The spot market represents current exchange rates, whereas options are derivatives of exchange rates . </P> <P> A country may gain an advantage in international trade if it controls the market for its currency to keep its value low, typically by the national central bank engaging in open market operations in the foreign exchange market . In the early twenty - first century it was widely asserted that the People's Republic of China had been doing this over a long period of time . </P>

How is the price of a currency determined