Causes of exchange rate changes - Exchange rates change whenever there is a change (increase or decrease) in the demand or supply of a currency

Central bank intervenes.

an institution that oversees and regulates the banking system and controls the monetary base. It can buy the its currency by trading its foreign currency from reserves. shifting demand to the right resulting in appreciating. Or it can sell its currency thus shfiting supply to the right causing depreciation.

Domestic demand for imports

if country no longer wishes to import certain products from a country. Due to this, they don't need to supply as much of their currency for the foreign currency to purchase these imports.Resulting in a decrease of supply and thus an appreciation. Where as a country wishes to import more, they need to supply more domestic currency resulting in a shift to the right and thus depreciation.

currency speculation

purchase or sale of a currency with the expectation that its value will change and generate a profit. When people expect appreciation they buy now to hopefully sell later, resulting in an increase in demand.Which may intern be the self fulfilling reason for its appreciation. When people expect depreciation they sell now and hope to buy later resulting in an increase in supply, resulting in the depreciation itself.

Domestic Incomes

If the incomes in the country rise, residents demand more imports. When imports increase they supply more of their currency so supply shifts right causing depreciation. If incomes decrease, they demand less imports so supply less (shift left) and so it results in appreciation.

Interest Rates

The cost of borrowing money. When interest rates rise it becomes more appealing to foreign investors, so demand for the domestic currency increases resulting in a shift to the right causing appreciation. Opposite for depreciation , when interest rates decrease it becomes less appealing so demand decreases causing depreciation.

Inflation Rate

the rate at which prices increase over time, resulting in a fall in the purchasing value of money. When inflation rates increase , exports from merry land become less competitive (more expensive) and so demand for the exports decrease. This results in demand shifting to the left . This in turn also means imports are cheaper for domestic consumers so they supply more domestic currency to exchange to buy such imports resulting in supply also shifting to the right. Both of these result in depreciation. When inflations rates decrease, exports are less competitive (cheaper) and so demand increases , shifting to the right. Also people import less since imports become more expensive so supply shifts to the left since they no longer exchange their domestic currency .Both result in appreciation.

foreign demand for domestic currency

two important reasons for foreigners to demand domestic currency: 1) foreign purchase of domestic goods and 2) foreign investment in domestic assets. This means if demand increases, shifting it to the right , resulting in appreciation. If demand decreases, it shifts to the left causing depreciation.