Current location - Loan Platform Complete Network - Foreign exchange account opening - What is the effect of foreign exchange reserves on the stability of RMB value?
What is the effect of foreign exchange reserves on the stability of RMB value?
Your question contains three questions, and it is impossible to answer them in detail in one day and one night, but you can divide your question into the following three questions through simple answers:

One. Conditions for RMB appreciation and depreciation. Two. Among the five functions of foreign exchange, the role of foreign exchange in the stability of local currency. Three. Conditions for monetary stability.

Generally speaking, this is not a good and clear question, more accurately, it is a judgment result of things.

The first issue is the conditions for RMB appreciation and depreciation.

For countries with different exchange rate systems, the formation mechanism of exchange rate is different. China has a managed floating exchange rate system, with reference to a basket of currencies such as the US dollar. The central bank is the institution that formulates exchange rate policy. The so-called managed floating is to refer to a basket of currencies. If the currencies of other countries depreciate, it will affect our country. This decisive factor lies in the purchasing power of RMB. If the same thing is 1 USD in the US and RMB in 7 yuan in China, then the exchange rate is 1:7.

Specific factors include: First, the balance of payments situation. The balance of payments is the dominant factor that determines the exchange rate trend. The balance of payments is the sum of various payments in a country's foreign economic activities. Generally speaking, the balance of payments deficit indicates a shortage of foreign exchange. Under the floating exchange rate system, market supply and demand determine the change of exchange rate, so the balance of payments deficit will cause the local currency to depreciate and the foreign currency to appreciate, that is, the foreign exchange rate will rise. On the contrary, the balance of payments surplus leads to the decline of foreign exchange rate. It should be noted that under normal circumstances, changes in the balance of payments determine the long-term trend of the exchange rate.

Second, national income. Generally speaking, the increase of national income leads to the increase of consumption level, and the demand for local currency also increases accordingly. If the money supply remains unchanged, the extra demand for local currency will increase the value of local currency and cause the depreciation of foreign exchange. Of course, whether the exchange rate will fall or rise due to changes in national income depends on the reasons for the changes in national income. If the national income is increased by increasing the supply of goods, the purchasing power of the country's currency will be strengthened and the foreign exchange rate will decline for a long time. If the national income is increased by expanding government expenditure or total demand, the excess demand must be met by expanding imports under the condition of constant supply, which will increase the foreign exchange demand and the foreign exchange rate will rise.

Third, the level of inflation. The level of inflation rate is the basis of influencing exchange rate changes. If a country issues too much money and the amount of money in circulation exceeds the actual demand in the process of commodity circulation, it will cause inflation. Inflation reduces the purchasing power of a country's currency at home and devalues it at home. Other things being equal, the domestic devaluation of the currency will inevitably lead to the external devaluation. Because the exchange rate is a comparison of the currencies of two countries, the value represented by the unit currency of a country with too much currency is reduced, so when the currency of that country is converted into foreign currency, it needs to pay more money than the original national currency.

The change of inflation rate will change people's demand for currency transactions and their expectations of bond yields and foreign currency values. Inflation leads to the rise of domestic prices. Under the condition that the exchange rate remains unchanged, exports lose money and imports are favorable. In the foreign exchange market, the demand for foreign currency increases and the demand for domestic currency decreases, which leads to the rise of foreign exchange rate and the depreciation of domestic currency. On the contrary, if a country's inflation rate decreases, the foreign exchange rate will generally decrease.

Fourth, the money supply The money supply is the primary factor that determines the value and purchasing power of money. If the domestic money supply decreases, the local currency is more valuable because of scarcity. Usually, the reduction of money supply goes hand in hand with the tightening of money supply and credit, which leads to the decline of total demand, output and employment, the decline of commodity prices, the rise of local currency value and the corresponding decline of foreign exchange rate. If the money supply increases, the surplus money will show up in the form of inflation, domestic commodity prices will rise and purchasing power will decline, thus promoting the import of relatively cheap foreign goods in large quantities and the foreign exchange rate will rise.

Verb (abbreviation of verb) financial revenue and expenditure A country's financial revenue and expenditure has a great influence on the balance of payments. The expansion of fiscal deficit will increase aggregate demand, which will often lead to balance of payments deficit and inflation. As a result, the purchasing power of local currency declines and the demand for foreign exchange increases, which in turn pushes the exchange rate up. Of course, if the fiscal deficit expands, monetary policy, supplemented by measures to strictly control the amount of money and raise interest rates, will attract foreign capital inflows, make the local currency appreciate and the foreign exchange rate fall.

Interest rate of intransitive verbs

Interest rate has a great influence on short-term exchange rate under certain conditions. The influence of interest rate on exchange rate is the flow of funds, especially short-term funds, caused by the difference of interest rates in different countries. Under normal circumstances, if the interest rate difference between the two countries is greater than the forward and spot exchange rate difference between the two countries, funds will flow from countries with lower interest rates to countries with higher interest rates, which is conducive to the balance of payments of countries with higher interest rates. It should be noted that although the interest rate level has a certain impact on the exchange rate, its role is limited from the basic factors that determine the fluctuation trend of the exchange rate. It only temporarily affects exchange rate changes under certain conditions.

Seven. Exchange rate policies and market intervention in various countries

The exchange rate policies of various countries and their intervention in the market affect the exchange rate changes to some extent. Under the floating exchange rate system, central banks of all countries are trying their best to coordinate their monetary policies and exchange rate policies, trying to support the stability of their own currencies by influencing the supply and demand of the foreign exchange market. The main means by which central banks influence the foreign exchange market are: adjusting their own monetary policies and influencing the exchange rate through interest rate changes; Direct intervention in the foreign exchange market; Implement foreign exchange controls on capital flows.

Eight. Speculation and Market Psychological Expectation

Since 1973 implemented the floating exchange rate system, speculation in the foreign exchange market has intensified. Speculators are often powerful and can add fuel to the fire in the foreign exchange market, so that the exchange rate changes are far from its equilibrium level. Speculators often use the market to attack a certain currency, and the offensive is so strong that it is difficult to prevent central banks from intervening in the foreign exchange market. Excessive speculation intensifies the turmoil in the foreign exchange market, hinders normal foreign exchange transactions and distorts the relationship between foreign exchange supply and demand.

In addition, participants and researchers in the foreign exchange market, including economists, financial experts and technical analysts, as well as fund traders, devote themselves to the study of foreign exchange market trends every day. Their judgment on the market, their influence on the psychology of market traders, and traders' own predictions on the market trend are all important factors affecting the short-term fluctuation of exchange rate. When the market expects a currency to fall, traders will sell a lot of the currency, which will lead to a decline in the exchange rate of the currency; On the contrary, when people expect a certain currency to become stronger, they will buy it in large quantities, thus making its exchange rate rise. Because the public expectation is speculative and decentralized, it intensifies the oscillation of short-term exchange rate fluctuations.

Nine. Political and unexpected factors

Because capital pursues safety first, political and unexpected factors have a direct and rapid impact on the foreign exchange market, including political stability, policy continuity, government's foreign policy, war, economic sanctions, natural disasters and so on. In addition, the general elections in western countries will also have an impact on the foreign exchange market. Politics and emergencies, because of their suddenness and timeliness, make the market unpredictable, so it is easy to form a shock wave to the market. Once the market reacts to the news and digests it, the influence of the original news will be greatly weakened.

The second question: the role of foreign exchange in the stability of local currency in the five major functions.

In short, it can be said that a certain amount of foreign exchange reserves is an important means for a country to adjust its economy and achieve internal and external balance. When the balance of payments is in deficit, the use of foreign exchange reserves can promote the balance of payments; When the domestic macro-economy is unbalanced and the total demand exceeds the total supply, foreign exchange can be used to organize imports, thus adjusting the relationship between total supply and total demand and promoting macroeconomic balance. At the same time, when the exchange rate fluctuates, foreign exchange reserves can be used to intervene in the exchange rate to stabilize the exchange rate. Therefore, foreign exchange reserves are an indispensable means to achieve economic balance and stability, especially when economic globalization is developing and one country's economy is more susceptible to the influence of other countries' economies. Just like our passbook, it can also be said to be a reservoir, which plays the role of a regulator.

The third question: the conditions for monetary stability.

In fact, in a sense, the opposite direction of the first question is the condition of monetary stability, but foreign exchange reserves are an important factor in the basic analysis of foreign exchange transactions, and their important function is to maintain the stability of the foreign exchange market. Whether a country's currency is stable or not depends largely on the foreign exchange liquidity that its foreign exchange reserves can guarantee under specific market conditions. From the international experience, even if a country's currency meets all the theoretical conditions for exchange rate stability, if it is impacted by speculative forces and cannot meet the sudden expansion of foreign exchange flow in the foreign exchange market in a short time, it will have to depreciate. Judging from the 1998 Asian financial crisis, in a strong speculative atmosphere, impatient nationals and cautious foreign investors often lose confidence in the currency, which has become a fatal force to promote the violent fluctuations in the foreign exchange market. Driven by this force, the government's efforts to maintain the exchange rate were actually forced to give up long before the reserves fell to zero.

The structure and level of foreign debt is also one of the important factors in the basic analysis of foreign exchange transactions. If a country has external liabilities, it will inevitably affect the foreign exchange market; If the foreign debt is not properly managed, the resilience of its foreign exchange reserves will be weakened and the stability of its currency will be affected. Many countries, such as Argentina and Brazil, have more foreign debts than reserves. Their initial idea is that foreign debts will continue to flow. However, under certain market conditions, if the country fails in its large-scale financing efforts through the international market and loses its original financing channels (as happened in the Southeast Asian currency crisis and the Argentine financial crisis), it can only use foreign exchange reserves to meet liquidity and maintain market confidence, and the stability of foreign exchange reserves will be challenged. From the international experience, when the exchange rate fluctuates due to improper foreign debt management, the exchange rate of the affected currency is often underestimated. The degree of underestimation mainly depends on the stability of economic system and social order. And if a country's short-term foreign debt is mostly, it will directly impact foreign exchange reserves. And if there is the "rescue" of the International Monetary Fund, the sharp devaluation of the currency will bear additional adjustment burden besides the commercial conditions of IMF loans.

Therefore, to sum up, the stabilizing effect of foreign exchange reserves on the value of RMB is in the first place; Did you sell a lot of foreign exchange when the RMB appreciated? When RMB depreciates, do you buy a lot of foreign exchange? The answer to this little question is not as simple as you say. What you see is only one aspect. As for the increase in circulation, it can only be distributed moderately according to the calculated amount when the monetary equivalent is greater than, which can play a certain role, but it can't play a decisive role! !

Answer finished, thank you! !