Exchange rates behave significantly more volatile in the short term than fundamental data such as prices, interest rates, or income. The associated lack of explanation in macroeconomic exchange rate theories raises the question of which factors might be significant for the short-term development of exchange rates. The relatively young microstructure research focuses on the peculiarities of market structure and the importance of market participants. The central focus is on the process of information processing and dissemination. The work identifies three key explanatory approaches from microstructure research for short-term exchange rate fluctuations, demonstrates their empirical relevance, and inquires about possible economic policy implications.