In addition to our regular monthly surveys of projections for over 90 currencies we also undertake a special survey of factors affecting exchange rates in Foreign Exchange Consensus Forecasts (in March and August) for the currencies listed below.

G7 & Western Europe Asia Pacific Eastern Europe Latin America Africa
US Dollar/Euro Australian Dollar Czech Koruna Argentinian Peso South African Rand
Japanese Yen Indonesian Rupiah Hungarian Forint Brazilian Real  
UK Pound Malaysian Ringgit Polish Zloty Chilean Peso  
Canadian Dollar New Zealand Dollar Russian Rouble Colombian Peso  
Norwegian Krone Philippine Peso Turkish Lira Mexican Peso  
Swedish Krona Singapore Dollar   Peruvian New Sol  
Swiss Franc South Korean Won   Venezuelan Bolivar  
  Taiwan Dollar      
  Thai Baht      

To download a sample issue of Foreign Exchange Consensus Forecasts please click on the button to below or continue reading to learn more about this special survey.

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We ask our panellists to rank the current importance of a range of different factors or economic indicators in determining exchange rate movements (against the US dollar, unless otherwise noted). Scores are assigned to each of the economic factors shown in the table below on a scale of 0 (no influence) to 10 (very strong influence). The consensus results are the averages of individual panellists' scores for each factor or economic indicator. Given that different currencies are influenced by a wide range of factors, we limited those considered to a common list of six (relative growth, inflation differential, trade/current account balance, short- and long-term interest rate differentials and equity flows, which we asked our panels to assess for every currency. In addition, we asked panellists to suggest, and rank, other factors or economic indicators which they felt to be of particular importance in determining exchange rate movements. The most frequently cited of these for each currency appear in the right-hand column of the table below, with the exception of a few currencies for which two main factors or economic indicators were equally frequently cited.

The table and text commentary below represent a small portion of this special survey taken from our March 2011 issue of Foreign Exchange Consensus Forecasts.

Exchange Rates per US$, unless Otherwise Stated Relative Growth Inflation Differential Trade/
Current Account
Interest Rate Differentials
Short (Long)
Other Factors (Score)
G-7 & Western Europe
Euro 5.7 5.3 4.3  7.3 (5.7) 6.0 Sovereign Debt Risks (7.5)
Japanese Yen 6.3 5.5 4.8 7.8 (7.0) 6.0 Risk Aversion (7.0) 
UK Pound 6.0 5.0 5.0 7.7 (6.0) 5.0 US$/€ Exchange Rate (5.0)
Swiss Franc* 5.0 3.3 4.3 6.7 (4.7) 5.0 Sovereign Debt Risks (10.0)
Safe Haven Inflows (7.0)

Asia Pacific
Australian $ 6.3 4.5 4.3 7.8 (6.3) 4.8 Commodity Prices (9.0)
New Zealand $ 7.3 4.5 4.3 8.5 (6.0) 4.8 Commodity Prices (7.3)
Singapore Dollar 6.5  4.0 6.5 6.5 (5.0) 7.0 Implicit FX Management (8.0)
Taiwan Dollar
6.0 4.0 7.0 7.0 (5.5) 7.0 Relations with China (5.0)

Eastern Europe
Czech Koruna* 5.7 4.7 5.7 4.0 (5.0) 4.0 Regional Risk Sentiment (5.0) 
Polish Zloty* 7.0 6.7 7.0 5.0 (6.0) 5.3 Regional Risk Sentiment (10.0) 
Russian Rouble 5.5 7.0 7.5 4.5 (5.0) 7.0 Oil Prices (9.0) 

Latin America
Argentinian Peso 4.0 5.3 6.0 2.3 (1.3) 1.3 Currency Management (8.0)
Chilean Peso 6.0 5.7 5.0 7.0 (5.7) 5.7 Copper Prices (8.0)
Mexican Peso 6.7 5.7 4.3 6.7 (6.3) 5.3 US Growth (8.0)
Venezuelan Bolivar 0.5 1.5 5.0 0.0 (0.0) 0.0 Gov. FX Policy (9.0)
Oil Prices (9.0)

* Analysis refers to determinants of the exchange rate against the euro.

Exchange rates are clearly influenced by a wide range of different factors, and the importance of each varies both from country to country and, for any given currency, over time. This special survey is an attempt to compare and rank the differing degrees of sensitivity with which different currencies respond to these various influences. In addition, as these influences are frequently pushing in different directions, it should also help to determine which factors are likely to dominate.

While we ask our panellists to assign scores to six main factors as independent variables, it is clear that they are interlinked to a large degree. Most countries have entered 2011 on a more mature phase of the business cycle, at least in terms of production. However, the onset of deficit-reduction by governments is curbing domestic demand, making the expansion reliant on exports. Uneven fundamentals in most economies have cast doubt on the momentum behind already slowing recoveries. And the challenging financial climate has significant implications for interest rates and inflation, which is climbing on higher food and fuel prices. Ominously, the quake and tsunami crisis in Japan has added to concerns about output and further dampened prospects of monetary tightening. Nominal interest rate differentials are considered the most powerful drivers of FX movements, followed closely by relative growth.

In addition to the factors ranked at our request by panellists, we also asked for suggestions of others. The far right column in the table above shows only the most often cited or highly-ranked, with the exception of a few currencies for which two main factors were both frequently cited. ‘Sovereign debt risks’ are, unsurprisingly, a key consideration for the euro and the Swiss franc, though for different reasons. Similarly, ‘Regional Risk Sentiment’ is important for the Czech and Polish currencies, as a crisis in confidence in one country can quickly spread to another.

A portion of text from Foreign Exchange Consensus Forecasts, March 14, 2011