Question

how to develop the expectations of the market in an economy which countries deal in their own currencies with each other, instead of having the USD as reference

Answer 1

To begin with the expectations, it's about the rates of return that makes a country look high when compared and that's when the foreign investors fund flows inside out. Market Risk depends on Economical growth, long term debt growth rate, and territorial risk along with the risk premium. Currencies risk deal with the interest rate risks, the risk of financial instruments involved, the insolvency and liquidity ratios of a firm.

Investors, firms and individuals hold differed viewpoints and opinions and they'd hold different expectations of the market in an economy. And when trading with the currencies, it all depends on the demand and supply each currency has. For an example, Euros are the second most traded over the global economy , EUR/USD is the most favorite currency pair for everyone. Currency both weakens and strengthens the nation's economy and can make it's investments attractive by it's higher demand to the Foreign portfolio investors. One can cash in the opportunities and benefits involved by buying the investments at a cheaper currency rate and sell off the same at a higher currency rate. This could be a driving factor behind any expectation of an investor. Better Interest rates, good balance of payment, and good trade flows without trade barriers can be set as an examples of expectations to be made over the market using the currencies to benefit.