Economic impact of exchange rate:

(1) Impact on trade balance: Impact of exchange rate on import and export: The rise of exchange rate (direct quotation) can promote exports and restrain imports. (Foreign exchange rate rises, local currency rate falls)

(B) the impact on non-trade balance of payments

1. Impact on the balance of intangible trade: the exchange rate of a country's currency declines, the purchasing power of foreign currency increases, and goods and services are cheap. The decline in the purchasing power of local currency and the increase in the prices of foreign goods and services are conducive to improving the balance of payments of tourism and other services in the country.

2. Impact on unilateral transfer income: If a country's currency exchange rate falls, if domestic prices remain unchanged or rise relatively slowly, it will have an adverse impact on the country's unilateral transfer income and expenditure.

3. Impact on capital inflow and outflow: Exchange rate has little impact on long-term capital flow. In the short term, the exchange rate depreciates and capital flows out; The appreciation of exchange rate is beneficial to capital inflow.

4. Impact on official reserves:

The change of domestic currency directly affects the increase or decrease of domestic foreign exchange reserves through capital transfer and the increase or decrease of import trade volume.

(2) The exchange rate of reserve currency falls, which makes the real value of foreign exchange reserves of countries that maintain reserve currency suffer losses. Reserve countries have reduced their debt burden due to currency devaluation and benefited from it.

Exchange rate domestic economy:

(A) the impact on domestic prices

1, the exchange rate changes through the price changes of imported goods.

2. After the exchange rate changes, if the foreign exchange rate depreciates, the supply of goods in the domestic market tends to be tight and the price tends to rise, because the dividend is limited, which is beneficial to exports and relatively unfavorable to imports.

3. After the exchange rate changes, if the local currency depreciates, exports increase, imports decrease, trade deficit decreases, and surplus increases, it will inevitably increase the amount of money in the country and push up prices when other factors remain unchanged.

4. For currency exchange countries, if the local currency tends to appreciate against foreign currency, there will be a large amount of foreign capital flowing in to seek spreads, and if necessary control measures are not taken, the price of the country will also rise.

(2) Impact on national income, employment and resource allocation: devaluation of the local currency will help export restrict imports, and the restricted production resources will shift to export industries and import substitution industries, increasing national income and employment, thus changing the domestic production structure.

Exchange rate international economy:

1, the unstable exchange rate has deepened the competition among countries for the sales market and affected the normal development of international trade.

2. Affect the status and role of some reserve currencies and promote the diversification of international reserve currencies.

3. Intensify the speculation and turbulence in the international financial market, and at the same time promote the continuous innovation of international financial business.

Exchange rate financial market:

1, the exchange rate changes of some major countries directly affect the exchange rate changes of other currencies in the international foreign exchange market, making international finance turbulent.

2. Due to frequent exchange rate changes, foreign exchange risks have increased and foreign exchange speculation has intensified, further aggravating the turmoil in the international financial market.

3. The fluctuation of exchange rate, especially the exchange rate of major reserve currencies, affects the fund lending activities in the international financial market.

Exchange rate foreign exchange risk:

(1) Exchange rate risk: also known as foreign exchange risk, refers to the possibility that economic entities will suffer losses due to exchange rate changes in their economic activities of holding or using foreign exchange.

(2) Types of foreign exchange risks: transaction risk, translation risk and economic risk.

1. Transaction exchange rate risk refers to the possibility that economic entities will suffer losses due to changes in foreign exchange rates in transactions denominated and received in foreign currencies. Trading risks mainly occur in the following situations:

(1) Import and export risks of goods and services.

(2) Risk of capital input and output.

(3) Risks of foreign exchange positions held by foreign exchange banks.

2. Conversion exchange rate risk, also known as accounting risk, refers to the possibility of book losses caused by exchange rate changes when economic entities convert the bookkeeping base currency into bookkeeping base currency in the accounting treatment of balance sheets.

The bookkeeping base currency refers to various currencies used in circulation in economic entities and commercial activities.

Bookkeeping functional currency refers to the reporting currency used in the preparation of consolidated financial statements, usually the local currency.

3. Economic exchange rate risk, also known as operational risk, refers to a potential loss caused by the unexpected change of exchange rate affecting the production and sales quantity, price and cost of an enterprise, which leads to the decrease of income or cash flow of an enterprise in a certain period in the future.

Extended data:

Exchange rate (also known as foreign exchange rate, foreign exchange rate or foreign exchange market) The exchange rate between two currencies can also be regarded as the value of one country's currency against another.

Exchange rate is also a financial means for a country to achieve its political goals. The exchange rate will change because of interest rates, inflation, national politics and national economies. The exchange rate is determined by the foreign exchange market.

The foreign exchange market is open to different types of buyers and sellers to conduct extensive and continuous currency transactions (foreign exchange transactions are conducted 24 hours a day except weekends, that is, from 8: 15 GMT on Sunday to 22:00 GMT on Friday).

Spot exchange rate refers to the current exchange rate, and forward exchange rate refers to the exchange rate quoted and traded on the same day, but paid on a specific date in the future).

The fluctuation of a country's foreign exchange market will have an impact on import and export trade, economic structure and production layout. Exchange rate is the most important adjusting lever in international trade. A falling exchange rate can promote exports and curb imports.

For example, if the exchange rate of RMB against the US dollar is 0. 1502 (indirect pricing method), the price of a commodity in the United States is 15.02 US dollars.

If the exchange rate of RMB against the US dollar drops to 0. 1429, that is, if the US dollar appreciates and the RMB depreciates, you can buy this commodity with less dollars. The price of this commodity in the United States is 14.29.

Therefore, the price of this commodity in the American market will become lower. Commodity prices decrease, competitiveness becomes higher, and it is cheap and easy to sell.

On the other hand, if the exchange rate of RMB against the US dollar rises to 0. 1667, that is, the dollar depreciates and the RMB appreciates, then the price of this commodity in the US market is 16.67, and the dollar price of this commodity becomes more expensive, so you will buy less.

References:

Baidu encyclopedia-exchange rate