Exchange rate, also known as "foreign exchange market or exchange rate", is the ratio of one country's currency to another country's currency and the price of another currency expressed in one currency. Because of the different names and values of currencies in the world, one country's currency should set an exchange rate for other countries' currencies, that is, the exchange rate. In the short term, a country's exchange rate is determined by the demand and supply of foreign currency. Foreigners buying their own goods, investing in their own countries and speculating on their own currencies will all affect the demand for their own currencies. Domestic residents want to buy foreign products, invest in foreign countries and speculate in foreign exchange, which affects their money supply. In the long run, the main factors affecting the exchange rate are: relative price level, tariffs and quotas, preference for domestic goods relative to foreign goods and productivity.

Exchange rate pricing method

To determine the exchange rate between two different currencies, we must first determine which country's currency shall prevail. Due to different standards, several different exchange rate pricing methods have emerged.

(1) direct reference. Also known as the price payable method. It is based on a certain unit of foreign currency as the standard, converted into the national currency to express its exchange rate. Under the direct quotation system, the amount of foreign currency is fixed, and the fluctuation of exchange rate group is expressed by the change of the relative amount of domestic currency. The decrease in the local currency converted from a certain unit of foreign currency indicates that the exchange rate of foreign currency has decreased, that is, the depreciation of foreign currency or the appreciation of local currency. China and most countries in the world have won direct speech awards. The RMB exchange rate in China is a managed floating exchange rate system based on market supply and demand. The People's Bank of China announces the exchange rate of RMB against major foreign currencies according to the prices formed in the inter-bank foreign exchange market. Indirect pricing method. Also known as accounts receivable pricing method. It is based on a unit's domestic currency and converted into a certain amount of foreign currency to express its exchange rate. Under the indirect pricing method, the amount in local currency is fixed, and the fluctuation of exchange rate group is expressed by the change of relative foreign currency amount. The increase in the number of domestic currency converted into foreign currency in a certain unit indicates that the exchange rate of domestic currency has risen, that is, the appreciation of local currency or the depreciation of foreign currency. On the contrary, a decrease in the amount of domestic currency converted into foreign currency in a given unit indicates a decrease in the exchange rate of domestic currency, that is, the depreciation of local currency or the appreciation of foreign currency. Britain has always adopted indirect pricing method.

(2) Direct quotation and indirect pricing methods have opposite meanings to exchange rate fluctuation, so when quoting the exchange rate of a certain currency and explaining its exchange rate fluctuation, it is necessary to specify which pricing method is adopted to avoid confusion.

(3) The dollar pricing method, also known as the new york pricing method, refers to the indirect pricing method for foreign currencies in new york's international financial market, except the pound in the direct quotation. The dollar pricing method was formulated by the United States on September 1 2008 1978, and it is a common pricing method in the international financial market at present.