There are many reasons for the popularity of FX trading, but among the most important are the leverage available, the high liquidity of a market available 24 hours a day, the volatility of certain currency pairs and the very low dealing costs associated with trading FX.
Until recently, the FX market wasn't readily accessible to the retail trader or individual speculator. Most FX trading is speculative, with only a few percent of market activity representing governments' and companies' fundamental currency conversion needs. The main market participants are large financial institutions, but liquidity is also provided by multinational corporations, Central Banks, and private retail investors.
The primary factors influencing exchange rates include interest rates, balance of payments, the state of the economy, but currency pairs may also move on implications drawn from chart analysis as well as political and psychological factors - news and rumours.
