Currency price under a floating exchange rate system

The gold standard is a fixed exchange rate system, while currently many countries' currencies adapt to the floating exchange rate system. When adapting the floating exchange rate system, there are several factors that could influence the currency price to change.

Firstly, the trading account will influence the currency price. In a simplified model, there are two countries, A and B. When Country A has a trade surplus with Country B, Country B demands more A's currency to buy A's goods and services than Country A needs Country B's currency. Therefore, Country A's currency will appreciate.

Secondly, the economy's stability will influence the country's currency price. When an economy is stable, it means less risk to investors if they decide to hold the currency. Less risky securities, including currencies, are more attractive to investors, so the prices of such securities are higher than those of the risky ones.

Thirdly, the economic growth will influence the country's currency price. While one country is experiencing a fast economic growth, its currency will appreciate compared with those of the economies which have slower economic growth.

Fourthly, monetary policy will influence the country's currency price. The currency of one country with more aggressive expansionary monetary policy will depreciate compared with those of the countries with less aggressive expansionary monetary policy.

Fifthly, any information that can change people's expectations about the factors mentioned above in the future will influence the country's currency price at the moment of the information released.

These are the five key factors that I believe have the greatest impacts on the currency price changing under the floating exchange rate system. If we believe one country's currency price is below or above the real value, we may analyze the whole currency exchange floating process to see if there is any point that the price was not changed properly by the key factors.