Fundamental analysis influences the ekspresi dominan of price changes (the direction of the price of an entire currency) that is more influenced by government policies (monetary authority) or data released by various sources or certain news that is uncertain The truth (market sentiment and market rumors).
Category of mendasar factors
These broad and complex mendasar factors can be grouped into four broad categories:
1.Political factors
As one indicator tool to predict exchange rate movements, it is very difficult to know the timing / time of the exact occurrence and to determine its impact on exchange rate fluctuations. Sometimes a political development has an impact on exchange rate movements, but sometimes it does not have any impact on exchange rate movements.
2.The financial factor
The financial factor is very important in doing Fundamental Analysis. Any change in monetary and fiscal policy applied by the government, especially in the case of a policy concerning interest rate changes, will have a significant impact on changes in economic fundamentals. These policy changes also affect the value of the currency. The interest rate is the determinant of the exchange rate of a currency other than any other indicator such as the amount of money in circulation. The general rule regarding interest rate policy is the higher the interest rate the stronger the exchange rate. However, sometimes there is a misunderstanding that an increase in interest rates will automatically trigger the strengthening of the dominant money exchange rate. Attention to this interest rate should primarily be focused on the real interest rate, not on the nominal interest rate. This is because the calculation of the real interest rate has included the variable rate of inflation in it.
3.External factors
Can bring very significant changes to the exchange rate of a country. Economic changes occurring within a country can have regional effects for the economies of other countries in the same region. In the global asset allocation era, capital portfolio flows are no longer familiar with national borders. Fund managers, investors, and hedge funds that invest globally, pay close attention to economic changes, not just within the scope of one country, but also extend into the scope of a particular region / region.
4.Economic factors
Economic indicators are one of the factors that can not be separated and are an important part of the overall mendasar factor itself. Economic indicators are often used in mendasar analysis, namely:
-Gross national product (GNP) is the total production of goods and services produced by residents of the country whether residing / domiciled in the country or abroad in a certain period.
-Gross domestic product (GDP) is the sum of all goods and services produced by a country either by a domestic company or by a foreign company operating within the country at a given time / period.
-Inflation rate: One of the ways the government in tackling inflation is by making a policy to raise interest rates. The use of the inflation rate as one of the indicators of economic fundamentals is to reflect the level of GDP and GNP to its true value. The value of real GDP and GNP is a very important indicator for an investor in comparing investment opportunities and risks abroad.
Inflation indicators commonly used by investors:
*The Producer Price Index (PPI) is an index that measures the average price changes received by domestic producers for each output generated in each level of the production process. PPI data are collected from various economic sectors mainly from the manufacturing, mining and agriculture sectors.
*The Consumer Price Index (CPI) is used to measure the average change in retail prices of a particular group of goods and services. The CPI and PPI Index is used by a trader as an indicator to measure the inflation rate.
*Balance of payments is a balance sheet consisting of all activities of international economic transactions of a country, both commercial and financial, with other countries at a certain period. This balance of payments reflects all transactions between residents, governments, and domestic and foreign business entities, such as export and import transactions, portfolio investments, transactions between Central Banks, and others. With this balance of payments we know when a country has a surplus or a deficit.
-The unemployment rate is an indicator that can give an idea of the real conditions of various economic sectors. This indicator can be used as a tool to analyze the healthy / not the economy of a country. If the economy is in good condition it will achieve a low unemployment rate. But if the economy is sluggish then the unemployment rate increases.
-The foreign exchange rate is a comparison value or it can be called the exchange rate between a currency against another currency. This exchange rate is usually used as the main indicator to see the economic strength or the level of economic stability of a State. If the country's currency exchange rate is not stable then it can be said that the country's economy is not good or is experiencing economic crisis. It is therefore necessary for a State to have a stable currency in order for the country's economy to proceed smoothly and form a growth trend.
-PSNCR - Public Sector Net Cash Requirement or public sector cash requirement is the amount of money the government should borrow to finance its expenses. Because governments often spend more than they receive from tax revenues, and the only way to add to the shortfall is from borrowing.
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