On the other hand, when a country's international expenditure exceeds its income, it will have a balance of payments deficit, which means that the supply of foreign exchange (currency) is less than the demand of the foreign exchange market, so the exchange rate of its own currency will fall and the exchange rate of foreign currency will rise.
2. The difference of inflation rate. When inflation occurs in a country, the cost of its commodities will increase, and the price of export commodities denominated in foreign currency will inevitably rise, thus weakening the competitiveness of this commodity in the international market, leading to a decrease in exports, while improving the competitiveness of foreign commodities in the domestic market, leading to an increase in imports, thus changing the current account balance.
3. Interest rate difference. When the interest rate of a country is higher than that of other countries, it means that the cost of using domestic currency funds rises and the supply of domestic currency in the foreign exchange market decreases relatively; On the other hand, it also means that the income from giving up the use of funds will rise and international short-term capital will enter the market.
The foreign exchange supply in the foreign exchange market has increased relatively. Changes in the supply and demand of local and foreign currency funds led to an increase in the local currency exchange rate. On the contrary, when a country's interest rate is lower than that of other countries, the change of supply and demand of local and foreign currency funds in the foreign exchange market will make the exchange rate of its own currency fall.
4. Fiscal and monetary policies. Generally speaking, the huge fiscal deficit and inflation caused by expansionary fiscal and monetary policies will devalue the domestic currency; Tight fiscal and monetary policies will reduce fiscal expenditure, stabilize the currency and make the domestic currency appreciate externally.
5. Exchange rate expectations. Psychological expectation of exchange rate is increasingly becoming one of the important factors that affect short-term exchange rate changes, but psychological factors will only produce and play a role under certain market conditions.
6. Foreign exchange speculative power. If speculators expect a currency to appreciate, they will buy in large quantities, which will lead to an increase in the exchange rate of the currency; On the other hand, if speculators expect a currency to depreciate, they will sell it in large quantities, which will cause the exchange rate of this currency to fall immediately. Speculation is an important force in the short-term fluctuation of exchange rate in foreign exchange market.
7, the government's market intervention
8. Economic growth rate. Generally speaking, high economic growth rate is not conducive to the performance of domestic currency in the foreign exchange market in the short term, but in the long run, it strongly supports the strong momentum of local currency.
9. Macroeconomic policies. The impact of macroeconomic policies on exchange rates of various countries is mainly reflected in the tight matching of fiscal policies and monetary policies of various countries.
Extended data
affect
I. Impact of exchange rate changes on the balance of import and export trade
Exchange rate changes will cause changes in the prices of import and export commodities, thus affecting a country's import and export trade. The devaluation of a country's currency is conducive to increasing its exports and curbing its imports.
On the other hand, the appreciation of a country's currency is conducive to imports and is not conducive to exports; The impact of exchange rate changes on non-trade balance of payments is just like its impact on trade balance of payments.
Second, the impact of exchange rate changes on the domestic price level: first, the impact on the price of traded goods; The second is the impact on the price of non-tradable goods.
Third, the impact of exchange rate changes on international capital flows. The impact of exchange rate changes on capital flows is manifested in two aspects:
1. After the devaluation of the local currency, the unit foreign currency can be converted into more local currency, which will promote the increase of foreign capital inflow and the decrease of domestic capital outflow;
2. If the external value of the local currency will not depreciate and the foreign exchange rate will not rise, it will affect people's expectations of the exchange rate and then cause domestic capital flight.
Fourth, the impact of exchange rate changes on foreign exchange reserves. The influence of currency depreciation on the scale of a country's foreign exchange reserves; The exchange rate change of reserve currency will affect the actual value of a country's foreign exchange reserves; Frequent exchange rate fluctuations will affect the status of reserve currency.
Five, the impact of exchange rate changes on a country's domestic employment, national income and resource allocation. When a country's local currency exchange rate drops and the foreign exchange rate rises, it is conducive to promoting its exports, curbing imports, and making its export industries and import substitution industries flourish, thus accelerating the development of the entire national economy, increasing domestic employment opportunities and increasing national income.
On the other hand, if a country's currency exchange rate rises, its exports will be blocked; Imports have greatly increased due to the exchange rate stimulus, which has caused the country's export industry and import substitution industry to shrink, so resources will be transferred from export industry and import substitution industry to other departments.
Sixth, the impact of exchange rate changes on the world economy. The exchange rate changes of small countries have only a slight impact on the economies of their trading partners, while the exchange rate changes of freely convertible currencies in developed countries have a greater or even greater impact on the international economy.
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