I. Balance of payments
If a country's balance of payments is surplus, foreign exchange income is greater than foreign exchange expenditure, foreign exchange reserves increase, foreign exchange supply is greater than foreign exchange demand, and foreign demand for its currency increases, then its foreign exchange rate declines and its local currency appreciates. If it is a deficit; otherwise. It should be noted that the huge trade deficit of the United States is increasing, but the dollar has remained strong for a long time. This is a very special situation. The balance of payments is a comprehensive reflection of a country's foreign economic activities and has a direct impact on the changes of a country's currency exchange rate. Moreover, from the perspective of foreign exchange market transactions, international trade in goods and services constitutes the basis of foreign exchange transactions, which also determines the basic trend of the exchange rate.
(* Note: the balance of payments refers to the transactions of goods, services and income between a country and other countries in a certain period of time, the free transfer payment, the comprehensive reflection of the changes in the country's currency gold, special drawing rights and other countries' creditor's rights and debts. )
Second, inflation.
As we all know, inflation is the devaluation of currency and the overall and sustained rise of price level caused by the fact that the amount of money in circulation exceeds the actual needs of the economy under the credit currency system.
Generally speaking, the circulation of paper money exceeds the amount needed in circulation, which leads to the devaluation of paper money and the rise of prices. We call this phenomenon inflation, so how does inflation affect foreign exchange fluctuations?
(1) If the inflation rate of a country is higher than that of other countries, the export competitiveness of that country will be weakened, while the competitiveness of foreign goods in that country's market will be enhanced; This will cause the country's trade deficit and the gap between foreign exchange supply and demand, which will lead to the decline of the local currency exchange rate.
(2) Inflation will reduce a country's real interest rate, promote capital flight (such as the recent news that business tycoons are busy fleeing), and lead to the capital account deficit and the decline of the local currency exchange rate.
(3) Because inflation is a continuous process of rising prices, people's inflation expectations will evolve into expectations of the decline of the local currency exchange rate. Under this expectation, in order to avoid the possible losses caused by the devaluation of the local currency, people will sell their local currency and buy foreign exchange in the foreign exchange market. This speculation will lead to a further decline in the exchange rate of the local currency.
There are two major events in inflation, one is the rise in the prices of ordinary commodities and real estate, and the other is that the national macro-control will raise interest rates. Inflation is a common phenomenon in the development of market economy, and ordinary inflation will not immediately affect the market exchange rate. Only when it is higher than the world average will it attract investors' attention and cause changes in the international market exchange rate.
Every country has inflation. If its inflation rate is relatively high abroad, its currency will depreciate and the foreign exchange rate will rise.
Third, interest rates.
In the short term, the impact of interest rate on exchange rate is extremely significant. The transmission mechanism that affects the exchange rate includes the following three aspects.
(1) On the premise that other conditions remain unchanged, rising interest rates will attract capital inflows, create demand for the country's currency in the foreign exchange market, and push up the exchange rate of high-interest currencies. There are a lot of international hot money in the contemporary international financial market, which is extremely sensitive to the change of interest rate, so in the short term, inducing international capital flow is the main way for interest rate to affect exchange rate.
(2) Rising interest rate means credit crunch, which will curb the country's inflation. In a certain period of time, we can promote our currency exchange rate by stimulating exports and restricting imports.
(3) The rise of interest rate will restrain the country's total demand, especially the part of investment demand and consumption demand that relies heavily on loans, which will further restrict imports and help the country's currency exchange rate rise.
Fourth, economic factors and monetary policy.
As a comparison of the strength of the two countries, the better a country's economic development, its exchange rate will rise accordingly. Generally speaking, when a country's economy develops well, the exchange rate will rise accordingly, and vice versa.
Among the economic news that affects the short-term fluctuation of the foreign exchange market, the publication of economic statistics has the greatest influence on it. Among all the economic data, the regulation of interest rates in various countries and the trend of monetary policy introduced by the government are undoubtedly the most important.
For example, on Thursday, 20 17, the president of the European Central Bank made a hawkish speech on interest rates, kept interest rates unchanged, and emphasized support for loose monetary policy, thus boosting the euro, which caused the exchange rate of the euro against the US dollar to soar that night.
Second, non-agricultural data. The increase and decrease of employment data of non-agricultural population and unemployment rate are important data affecting the short-term fluctuation of foreign exchange trading market in recent years, which are published by American workers on the first Friday of each month. As far as the foreign exchange market is concerned, it is a barometer of the American economy, and the quality of the data itself indicates the quality of the American economic prospects. Directly affect the short-term fluctuations in the foreign exchange market.
Other economic data include industrial production, personal income, gross national product, operating rate, inventory rate, leading index of comprehensive economic indicators in the United States, and automobile sales. But their impact on the foreign exchange market is far less than that of non-agriculture.
Verb (abbreviation of verb) political factors
The foreign exchange market is greatly influenced by political factors, mainly because foreign exchange, as an international liquid asset, is facing greater risks than other assets under the pattern of political turmoil. When something happens, the fluctuation of the foreign exchange market often exceeds the changes in the stock market and bond market.
For example, on July 2 1 last week, Trump's "TongRumen" incident caused an uproar. The crisis of Trump's health care reform bill caused the US dollar index to fall to 93.85, the lowest in a year, and gold formed a strong support for some non-US currencies.
Sixth, investors' psychological expectations.
Among all the factors that affect the trend of foreign exchange, investors' psychological expectation is also an important factor that affects the short-term trend of foreign exchange. The fluctuation of foreign exchange market is mainly affected by the relationship between supply and demand. Market expectation, speculative information, market evaluation and economic news in the international financial market will all affect investors' psychology, thus causing short-term fluctuations in the foreign exchange market. For example, under special circumstances, when people are generally optimistic about a country's currency, they will buy in large quantities. If the foreign exchange market overpays, it will push up the country's exchange rate to a certain extent in the short term. Therefore, psychological expectation belongs to non-economic factors that affect exchange rate factors.
Summary: Exchange rate fluctuations in the foreign exchange market will be affected by many factors. Although the self-regulation of the market will always occupy the most important position, strengthening the attention to these issues will help you analyze the market trend and make better profits.