So what important policy changes should be paid attention to in foreign exchange transactions?
Fiscal policy. The influence of the adjustment of fiscal policy on the exchange rate trend is to affect the supply and demand of foreign exchange through the increase and decrease of fiscal expenditure and the adjustment of tax rate. Tight fiscal policy will curb aggregate demand and price increase by reducing fiscal expenditure and raising tax rate, which will help to improve a country's trade balance and international balance of payments, thus causing a country's currency's foreign exchange rate to rise. Generally speaking, if taxes are reduced, the market currency circulation will increase and the currency will fall; If taxes are increased, the currency will appreciate.
Bao Kun Financial Bian Xiao believes that from the perspective of fiscal policy, we can sometimes see the central government's intervention in the financial foreign exchange market. Because the exchange rate level of a country's currency often has an important impact on the country's international trade, economic growth rate, money supply and demand and even political stability, when the speculative forces in the foreign exchange market make the country's exchange rate seriously deviate from the normal level, the country's central bank often intervenes in the market. The intervention of the central bank has become a common phenomenon in the foreign exchange market. So the intervention of the central bank will also have a certain impact on the foreign exchange market.
Monetary policy. The main form of monetary policy is to change the money supply in the economic system, and the implementation of monetary policy can be divided into two situations: tightening and easing. Tight monetary policy refers to the central bank raising the rediscount rate, raising the deposit reserve ratio of commercial banks in the central bank, and selling government bonds in the market, that is, reducing the money supply, which leads to the appreciation of the exchange rate; Reverse operation will increase the money supply and lead to currency depreciation. The level of deposit reserve ratio determines the scale of funds that commercial banks can lend, thus determining the scale of a country's credit and the amount of money in circulation, and then affecting the total social demand, balance of payments and even the exchange rate.
For example, the Fed's interest rate hike, which has attracted much attention in recent two years, has a more important impact on the foreign exchange market, precious metals market and crude oil market. Many financial trading markets will keep a close eye on the progress of the Fed's interest rate hike, and the Fed's decision on whether to raise interest rates will greatly affect the price trend of financial markets. Therefore, investors who speculate in foreign exchange, precious metals and crude oil should pay attention to the Fed's interest rate hike, which belongs to the above-mentioned monetary policy issues.
The last point is government policy. The influence of government policy changes on exchange rate changes includes two aspects: first, the macroeconomic policies of individual countries, such as fiscal policy, monetary policy and exchange rate policy, will cause changes in the exchange rate of their own currencies, thus affecting the international foreign exchange market; Second, when the policy coordination among industrial countries is unbalanced or runs counter to each other, the foreign exchange market tends to fluctuate violently.