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A Fact of Life

It is essential to understand that Forex is a market that plays out in everyday life in a way that other markets do not. A fluctuation in currency value can have an impact on a nation's social, political, and economic conditions. In extreme situations, a nation's entire political structure can be shaken to the core.

Because of these high stakes, a government often uses all its power to control the value of its currency. It may decide that to protect its private citizens from international traders and stabilize its economy the government needs to control how its currency is traded. China, for example, has “pegged” its currency to the U.S. dollar, meaning that it has set a tight conversion rate of $1 to 7.27 yuan.


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