Demography can have much more to do with forex rates than most people think. Have a look at the correlation between the US population and the dollar index. Jan 1, 2006 = 100 for both variables. "Stunning", would probably be the right word.
![US Population vs US Dollar Index [2006/01/01 = 100]](https://blogger.googleusercontent.com/img/a/AVvXsEiYDO17IqaHbUhd5unzkDngmE59GdMCRdtyrt13PZgp-vNgapBi0CAkoh5QHBuJta4kaywjAJ69Z_V6iHl6CsCb7054UraYP6_mG3GH5yj5QaT2X7SPQN3rZGKlNv9vkujCB6YfIyoxWS8VtrGpT1hq5dtEPaS4MsfcjQCvzMRLenn-oyer-fkpVfsw=w640-h578 "US Population vs US Dollar Index [2006/01/01 = 100]") |
US Population vs US Dollar Index [2006/01/01 = 100] |
There is one problem, however. We are talking about processes that take at least tens of years and most forex traders want to know, what will happen within the next 15 minutes.
Some People Still Think That Current Accounts Are Correlated With Exchange RatesThe link between the variables is logical. More people require more dollars to carry out their transactions. As the demand for the currency is increased, its value also goes up. I never thought it was that simple.
Data source: U.S. Bureau of Economic Analysis, Population [POPTHM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/POPTHM, October 15, 2021. Board of Governors of the Federal Reserve System (US), Trade Weighted U.S. Dollar Index: Broad, Goods and Services [DTWEXBGS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTWEXBGS, October 15, 2021.