The Four Force Currency Theory: An Innovative Dynamic of Pull–Push Effects in Exchange Rate Determination

Most industrialized economies now operate hybrid, managed‑floating exchange rate regimes that are neither perfectly flexible nor rigidly fixed, as illustrated by episodes such as the 1992 UK currency crisis, the 1997–98 Asian currency crisis, and the 2001 Latin American currency crisis, where exchange rates proved highly speculative and volatile. The core causes of these crises often lie in government mismanagement, large external and short‑term debts, and weak liquidity management, all of which intensify macroeconomic fragility and heighten the risk of currency turmoil. This raises several fundamental questions: To what extent do currency crises propagate into regional or global economic disruptions? What forces drive such crises, and how should the international monetary system and currency value be re‑conceptualized? Are hedge‑fund‑driven speculative flows primarily responsible for destabilizing the currency system, or do deeper structural forces dominate? This paper addresses these questions by proposing an innovative Four Force Currency Theory that combines a pull–push mechanism with a F‑curve based interpretation of currency dynamics. Our model focuses on four strategic agents G7 economies, central banks, hedge funds, and domestic citizens and analyzes how their interactions jointly determine exchange rates and currency trajectories over time. F‑curve not merely as a trade‑balance analytic tool but as a dynamic currency adjustment mechanism consistent with the Marshall–Lerner condition, this research paper provides a structured framework for understanding exchange‑rate determination, crisis propagation, and policy design.