Under the direct method, the exchange rate rises, the foreign currency appreciates, and the domestic currency depreciates;

Under the indirect method, the exchange rate rises, the foreign currency depreciates, and the domestic currency appreciates.

In the international foreign exchange market, most countries in the world, including China, currently adopt the direct pricing method, so usually the increase in exchange rates we talk about is under the direct method. In this case, the foreign currency Appreciation, national currency depreciation.

Pricing method

To determine the price comparison between two different currencies, you must first determine which country's currency is used as the standard. Due to different determination standards, several different foreign exchange rate pricing methods have been produced.

(1) Direct quotation method (refer to "Payable quotation method")

The direct quotation method, also called the payable quotation method, is based on a certain unit (1, 100 , 1000, 10000) foreign currency as the standard to calculate how many units of domestic currency should be paid. It is equivalent to calculating how much local currency is payable to purchase a certain unit of foreign currency, so it is called the price payable method. In the international foreign exchange market, most countries in the world, including China, currently adopt the direct pricing method. For example, the exchange rate of Japanese yen to US dollar is 119.05, that is, 1 US dollar is equal to 119.05 yen.

Under the direct pricing method, if a certain unit of foreign currency is converted into more local currency than in the previous period, it means that the value of the foreign currency has increased or the value of the local currency has fallen, which is called an increase in the foreign exchange rate; conversely, if a smaller unit is used than the original The local currency can be exchanged for the same amount of foreign currency. This means that the decline in the value of the foreign currency or the rise in the value of the local currency is called a fall in the foreign exchange rate, that is, the value of the foreign currency is directly proportional to the rise or fall in the exchange rate. The direct pricing method is similar to the common sense of buying and selling commodities. For example, the direct pricing method of the US dollar is to use US dollar foreign exchange as the commodity to be bought and sold, with the US dollar as the unit, and the unit is constant, while the RMB as the currency side changes. The same is true for the purchase and sale of general commodities. You buy a piece of clothing for 500 yuan and sell it for 550 yuan, making a profit of 50 yuan. The commodity has not changed, but the currency has increased.

(2) Indirect quotation method (refer to "Receivables quotation method")

The indirect quotation method is also called the receivables quotation method. It uses a certain unit (such as 1 unit) of domestic currency as the standard to calculate several units of foreign exchange currency receivable. In the international foreign exchange market, euros and pounds sterling. Australian dollars, etc. are all indirect pricing methods. For example, the exchange rate of the euro against the U.S. dollar is 0.9705, which means that 1 euro is worth 0.9705 U.S. dollars. In the indirect pricing method, the amount of domestic currency remains unchanged, and the amount of foreign currency changes with the change in the value of the domestic currency. If a certain amount of local currency can be exchanged for less foreign currency than in the previous period, it means that the value of foreign currency has increased and the value of local currency has decreased, that is, the foreign exchange rate has fallen; conversely, if a certain amount of domestic currency can be exchanged for more foreign currency than in the previous period, it means that the value of foreign currency has decreased. , the value of the local currency rises, that is, the foreign exchange rate rises, that is, the value of foreign exchange is inversely proportional to the rise or fall of the exchange rate. Therefore, the indirect pricing method is the opposite of the direct pricing method.

(3) The direct pricing method and the indirect pricing method have exactly opposite meanings in the exchange rate rise and fall. Therefore, when quoting the exchange rate of a certain currency and explaining the rise and fall of its exchange rate, it is necessary to make it clear which one is used. Method of pricing to avoid confusion.

(4) The U.S. dollar pricing method, also known as the New York pricing method, refers to the pricing method that uses the indirect pricing method for other foreign currencies in addition to the direct pricing method for pounds in the New York international financial market.

The U.S. dollar pricing method was formulated and implemented by the United States on September 1, 1978. It is currently a common pricing method in the international financial market.

Under the gold standard, the basis for exchange rate determination is the gold point. ), under the conditions of banknote circulation, the basis for its decision is purchasing power par (purchase power par)