Currency values are influenced by a variety of economic factors that reflect a country's overall economic health and stability. One of the primary factors is interest rates set by central banks. Higher interest rates tend to attract foreign capital, leading to a stronger currency, while lower rates can weaken it.

Inflation is another critical factor. A country with low inflation typically sees its currency value increase because its purchasing power remains stable compared to countries with higher inflation rates. Conversely, high inflation erodes currency value over time.

Gross Domestic Product (GDP) growth signals economic strength and can boost currency value as investors seek opportunities in growing economies. A positive GDP growth rate often correlates with a stronger currency.

Trade balances, which measure the difference between a country's exports and imports, also impact currency values. A trade surplus (more exports than imports) usually strengthens a currency, while a trade deficit can weaken it.

Political stability and government debt are significant factors as well. Countries with stable political environments and manageable debt levels are seen as less risky, which can enhance their currency’s value. In contrast, political instability or high debt levels can deter investment and weaken a currency.

Lastly, market sentiment and investor confidence play a crucial role, as perceptions about economic health can drive currency demand.