In the case of a fixed exchange rate, the activities of speculators in the foreign exchange market depend on the degree of trust in the government. If they are convinced that the government does not have sufficient reserves to maintain a weakening currency, speculation against this currency will increase, which will accelerate its devaluation. If the exchange rate of any currency tends to decrease, then the entities sell it in advance to more stable currencies, which worsens the position of a weakened currency. Foreign exchange markets respond quickly to changes in the economy and politics, to fluctuations in exchange rates. Thus they expand currency speculation opportunities.
Currency policy. The ratio of market and state regulation of the exchange rate affects its dynamics. The formation of the exchange rate in the foreign exchange markets through the mechanism of supply and demand of the currency is usually accompanied by sharp fluctuations in exchange rates. The market is developing a real exchange rate – an indicator of the state of the economy, cash circulation, finance, credit and the degree of trust in a certain currency. State regulation of the exchange rate is aimed at increasing or reducing it, based on the objectives of monetary and economic policy. For this purpose, a certain monetary policy is being pursued.
Thus, the formation of the exchange rate is a complex multi-factor process, due to the interconnection of the national and world economy and politics. Therefore, when forecasting the exchange rate, the considered exchange-forming factors and their ambiguous effect on the ratio of currencies depending on the specific situation are taken into account.
Thus, the influence of short-term factors on exchange rates explains deviations from trends based on PPPs. In addition, the impact of these factors is not always unambiguous, which greatly complicates the forecasting of exchange rates in the short term.