Foreign exchange demand is relative to "foreign exchange supply". Theoretically speaking, foreign exchange supply and demand reflects various international economic transactions listed in the balance of payments, and the debit items in the balance of payments constitute foreign exchange demand. Specifically, a country's foreign exchange demand mainly comes from: ① domestic imports of goods and services. ② Unilateral transfer of domestic financial assets to foreign countries. ③ Domestic residents purchase overseas financial assets or make direct investments abroad. ④ Foreign residents sell their domestic assets. Therefore, a country's balance of payments deficit means that the supply of foreign exchange in the foreign exchange market is in short supply, and the supply of local currency exceeds demand, which leads to the rise of foreign exchange rate. On the contrary, a country's balance of payments surplus means that foreign exchange supply exceeds demand, and local currency supply exceeds demand, which leads to the decline of foreign exchange rate.