How to play the currency markets

The foreign-exchange market moves quickly and it's highly risky. But if you know what you're doing, the rewards from trading currencies can be big. Tim Bennett explains.

With Europe's woes rarely out of the headlines, and the US printing more dollars, it's understandable why private investors are becoming more and more interested in the workings of the currency (or foreign exchange) markets. Trading currencies is risky it's speculative, short term, and often involves spread betting, which is in itself highly risky. But that's not to say you can't profit from it. Even if you're not interested in actively trading, it's worth understanding what drives currency movements these are, after all, by far the biggest financial markets in the world.

So what moves exchange rates? The short answer is, almost anything. Because the forex market is so liquid, exchange rates are in effect a highly sensitive barometer of a country's economic fortunes. But as some data points are far more important than others, here are the ones to watch.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.