A: Foreign exchange has two meanings: dynamic and static. The dynamic meaning of foreign exchange is to understand it as a verb, which means to realize the international transfer of funds and pay off the international debt-creditor relationship by converting one country's currency into another country's currency. The static meaning is to understand it as a noun, which refers to the international payment means expressed in foreign currency, that is, foreign currency assets that can directly pay foreign debts.

As a means of international payment and settlement, foreign exchange must have the following characteristics; (1) international, that is, it must be foreign assets denominated in foreign currency; (2) Repayability, that is, it must be able to repay abroad; (3) convertibility, that is, it must be freely convertible into currencies or financial assets of other countries.

The above characteristics of foreign exchange determine its important position in the international economy. Specifically: (1) As an international means of payment and medium of exchange, foreign exchange is conducive to the international transfer of purchasing power and the smooth settlement of international creditor's rights and debts, and can promote the development of international trade, the flow of international capital and the adjustment of international capital surplus and deficit; (2) In today's society, the process of global economic integration is accelerating, and a country's economic development cannot be separated from other countries. Foreign exchange has become an important tool for the government to intervene in economic activities. The government can exert an important influence on domestic prices, employment and international competitiveness through foreign exchange policies and foreign exchange management measures.