The exchange rate is also called "foreign exchange market or exchange rate". The ratio of one country's currency to another is the price of another currency expressed in one currency. Because of the different names and values of currencies in the world, one country's currency should set an exchange rate for other countries' currencies, that is, the exchange rate. For example, the exchange rate of RMB against the US dollar is equal to "how many US dollars can be exchanged for a basic unit of RMB (one yuan)", while the exchange rate of US dollar against RMB represents "how many RMB can be exchanged for a basic unit of US dollar (one yuan)". (In foreign exchange transactions, there are also some basic units that are not one yuan, such as how many dollars the Japanese yen is converted into according to 65438+ million yen).

There are two pricing methods for foreign exchange rates:

(1) Direct quotation (refer to "Price payable method").

(2) Indirect quotation (refer to "Accounts Receivable Quotation Method")

Under the gold standard system, the basis of exchange rate determination is the gold delivery point, and under the condition of paper money circulation, the basis of exchange rate determination is purchasing power parity.

The factors that affect the exchange rate change are:

(1) Balance of payments. If a country has a surplus in its balance of payments, its currency exchange rate will rise; If it is a deficit, the exchange rate of the country's currency will fall.

(2) inflation. If the inflation rate is high, the country's currency exchange rate is low.

(3) interest rate. If a country's interest rate rises, the exchange rate will be high.

(4) Economic growth 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.

(6) foreign exchange reserves. If a country's foreign exchange reserves are high, its currency exchange rate will rise.