2. Inflation. Inflation will cause the exchange rate to fall, and vice versa.
3. Interest rate. High interest rates will absorb the return of capital, thus ensuring the inflow of capital. If foreign investors' demand for domestic currency increases, the exchange rate will rise.
4. Economic growth rate. A country's economic growth is measured by GDP growth, which is the fundamental factor that determines the long-term change of exchange rate. If a country's economic growth rate is high, its currency exchange rate is high.
5. Fiscal deficit. If a country has a huge budget deficit, its currency exchange rate will fall.
Foreign exchange is the creditor's rights held by the monetary management authorities (central bank, monetary management institutions, foreign exchange stabilization fund and Ministry of Finance) in the form of bank deposits, treasury bonds and long-term and short-term government securities. , which can be used when the balance of payments is in deficit.
Including foreign currency, foreign currency deposits, foreign currency securities (treasury bonds, treasury bonds, corporate bonds, stocks, etc.). ) and foreign currency payment vouchers (bills, bank deposit vouchers, postal savings vouchers, etc.). ).
definition
broad sense
All foreign currency assets owned by a country. It refers to the flow of money between countries and a specialized commercial activity of exchanging one country's currency for another country's currency to pay off international creditor's rights and debts. In fact, it is the creditor's rights held by the monetary management authorities (central bank, monetary management institutions, foreign exchange stabilization fund and Ministry of Finance) in the form of bank deposits, treasury bonds, long-term and short-term treasury bonds, etc. Can be used when the balance of payments is in deficit.
narrow sense
Various payment methods expressed in foreign currency, which are generally accepted by all countries and can be used for international settlement of creditor's rights and debts. It must have three characteristics: affordability (assets that must be expressed in foreign currency), availability (claims that can be compensated abroad) and convertibility (foreign currency assets that can be freely converted into other means of payment).
Trading market
Foreign exchange trading refers to the way of buying one currency in a pair of currency combinations and selling the other currency at the same time. The exchange rates of various currencies in the international market fluctuate frequently, and they are traded in the form of currency pairs, such as Euro/USD or USD/JPY.
The main advantage of the foreign exchange trading market lies in its high transparency. Due to the huge transaction volume, the main funds (such as government foreign exchange reserves, multinational consortium fund exchange, foreign exchange speculators fund operation, etc. ) has a very limited impact on market exchange rate changes. On the other hand, from the fundamental analysis of exchange rate fluctuations, it is usually important data released by governments (such as GDP and GNP central bank interest rates), speeches by senior government officials, or news released by international organizations (such as the European Central Bank) that can have a greater impact.
There is no specific place in the foreign exchange market, and there is no central exchange. All transactions are conducted between banks through the Internet. Any financial institution, government or individual in the world can participate in the transaction 24 hours a day.
The foreign exchange market runs continuously for 24 hours, rising and falling, and never stops. Its trend is like the transition between day and night on the earth, and it goes on and on. Accordingly, the market trend of exchange rate is divided into four stages: bottoming, rising, topping and falling.