Factors which influence the exchange rate. Exchange rates are determined by factors, such as interest rates, confidence, the current account on balance of payments, economic growth and relative inflation rates.Click to see full answer. Likewise, people ask, why does the exchange rate change?Most of the world’s currencies are bought and sold based on flexible exchange rates, meaning their prices fluctuate based on the supply and demand in the foreign exchange market. A high demand for a currency or a shortage in its supply will cause an increase in price.Beside above, how often do currency exchange rates change? No, exchange rates do not change daily, in the sense that the exchange rate does not change just once a day. For example, the pound will not change value just once versus the euro or US dollar, from Monday to Tuesday. Instead, exchange rates change much more frequently. In fact, they change every second. Similarly one may ask, what factors affect exchange rates? 8 Key Factors that Affect Foreign Exchange Rates Inflation Rates. Changes in market inflation cause changes in currency exchange rates. Interest Rates. Changes in interest rate affect currency value and dollar exchange rate. Country’s Current Account / Balance of Payments. Government Debt. Terms of Trade. Political Stability & Performance. Recession. Speculation. How do you maintain a fixed exchange rate?A central bank maintains a fixed exchange rate by buying or selling its currency. If the domestic currency appreciates then the central bank will intervene and and sell its reserves of domestic currency in order to reduce the value of the domestic currency by increasing its supply in the forex market.