Direct quotation is also called GivingQuotation. This pricing method is based on the foreign currency of a certain unit and converted into the domestic currency of several units.
At present, there are three pricing methods in the world: dollar pricing method, direct quotation method and indirect pricing method. Direct quotation (receivable pricing method) is equivalent to how much local currency to pay for buying a unit's foreign currency, so it is called payable pricing method. At present, most countries, including China, only use direct quotation. For example, 1 USD, how much RMB should I exchange?
Several main differences between direct quotation method and indirect pricing method
1, there are essential differences between the two pricing methods.
Direct quotation converts foreign currency into equivalent domestic currency according to the standard of foreign currency. Indirect pricing method is based on domestic currency, and the amount is constant, which is converted into equivalent foreign currency. In fact, these two pricing methods are equivalent.
2. Adopt different countries.
A country can only adopt one pricing method at a time. At present, only a few developed countries adopt indirect pricing method, such as Britain and the United States, but USD/GBP still adopts direct quotation. Most other countries only use direct quotation.
3. The change of local currency value of the two pricing methods has different effects on the exchange rate.
The fluctuation of foreign exchange rate in direct quotation has a negative impact on the change of domestic currency value. For example, the appreciation of the local currency and the decline of the exchange rate; When the local currency depreciates, the exchange rate rises.
In the indirect pricing method, the exchange rate of the local currency amount remains unchanged. If the amount of foreign currency converted from a fixed amount of local currency decreases, the value of foreign currency will increase. If foreign currency appreciates, then the local currency falls, and of course the foreign exchange rate also falls.