Causing waste of resources. What policies did the government implement that led to the changes in foreign exchange?
I. Monetary policy
When the central bank thinks that the intervention in the foreign exchange market is effective and the intervention result will be consistent with the government's monetary policy, the central bank's participation in the foreign exchange market will affect the exchange rate. Central bank's participation is usually through purchase or sale.
Issue local currency and stabilize it at a level that is considered true and ideal. The judgment of other market participants on the influence of government monetary policy on exchange rate and the expectation of future policies will also have an impact on exchange rate.
Second, the political situation.
If the global situation tends to be tense, it will lead to instability in the foreign exchange market, abnormal inflow or outflow of some currencies, and the final possible result will be large fluctuations in the exchange rate. The stability of political situation is related to the stability of currency. Generally speaking, the more stable a country's political situation, the more stable its currency.
The influence of political factors on the exchange rate can be illustrated by some examples. 1987 Due to the continuous depreciation of the US dollar at the end of the year, in order to maintain the basic stability of the US dollar exchange rate,1987 65438+February 23,
The finance ministers and central bank governors of Japan and seven western countries issued a joint declaration, and began to implement large-scale joint intervention in the foreign exchange market on June 4 1988, selling a large number of yen and German marks and buying dollars, thus making
The US dollar exchange rate rebounded, maintaining the basic stability of the US dollar exchange rate. If you pay attention to the euro, you must have noticed that during the Kosovo war, the exchange rate of the euro against the US dollar fell 10% for three consecutive months. Why?
One of them is the downward pressure of the Kosovo war on the euro.
Three. Balance of payments situation
A country's balance of payments situation will lead to fluctuations in its local currency exchange rate. The balance of payments is a summary of all foreign economic and financial relations of a country's residents. A country's balance of payments reflects its economic status in the world, and also affects its macro-vision and micro-economic implementation. In the final analysis, the impact of the balance of payments situation is the impact of foreign exchange supply and demand on the exchange rate.
Foreign exchange income is caused by economic transactions (such as exports) or capital transactions (such as foreign investment in the country). Because foreign exchange is usually not freely circulated in the domestic market, it is necessary to exchange foreign currency.
Only local currency can be put into domestic circulation. This forms the foreign exchange supply in the foreign exchange market. However, due to an economic transaction (such as import) or a capital transaction (foreign investment), foreign exchange expenses are incurred. Because you need to use your own currency.
Converting into foreign currency can meet their respective economic needs, and the foreign exchange market has generated demand for foreign exchange.
When these transactions are merged and recorded in the balance of payments statistics, a country's foreign exchange balance is formed. If foreign exchange income exceeds expenditure, foreign exchange supply will increase; If foreign exchange expenditure is greater than income
Now, the demand for foreign exchange is increasing. The increase of foreign exchange supply, under the condition of constant demand, directly leads to the decline of foreign exchange price and the corresponding increase of local currency value; When the demand for foreign exchange increases, under the condition of constant supply
In this case, the price of foreign exchange will rise directly, and the value of local currency will fall accordingly.
Fourth, interest rates.
When the dominant interest rate of one country rises or falls relative to the interest rate of another country, in order to pursue higher return on capital, it will sell currencies with low interest rates and buy currencies with high interest rates. As the demand for a currency with a relatively high interest rate increases, the currency will appreciate against other currencies.
Let's look at an example to explain how interest rates affect the exchange rate: suppose there are two countries, A and B, both of which do not implement foreign exchange controls, and funds can flow freely between the two countries. As part of the monetary policy of country A
The country's interest rate is raised 1%. At the same time, the interest rate in country B remains unchanged. There is a huge amount of short-term hot money in the market, which always flows between countries to find the most favorable interest rate. Other things being equal.
When the dominant interest rate in country A increases, huge short-term hot money will flow into country A to pursue higher interest rates. When hot money flows out of country B, it will sell a huge amount of country B's currency for country A's currency. This is the need for the currency of country A.
Seeking to rise, the result is that the currency of country A is stronger than that of country B.
The above example is aimed at the situation between the two countries. In fact, in today's international market, it also applies to the global scope. Over the years, the free flow of funds and the abolition of foreign exchange controls have been the general trend. such
The trend provides great convenience for the free flow of international short-term hot money (sometimes called "hot money"). It should be pointed out that investors will only put money when they think that the change of exchange rate will not offset the return brought by high interest rate.
Move to a region or country with high interest rates.
Verb (abbreviation of verb) market judgment
The foreign exchange market does not always follow the logical change pattern. Uncertain factors such as personal feelings, judgments, and analysis and understanding of various global political and economic events all have an impact on the exchange rate. Operators in the market must correctly understand the published reports or materials, such as foreign exchange receipts and payments data, inflation indicators, economic growth rate, etc.
But in fact, before the above-mentioned reports or materials are made public to the market, the market has already expected or judged the essence reflected by the reports or materials. This expectation or judgment will precede the report or information.
Reflected in the price before disclosure. Once there are real reports or materials that are quite different from people's expectations or judgments, it will lead to large fluctuations in the exchange rate. A foreign exchange trader must correctly understand various economic indicators and data.
Is not enough. He must know what kind of expectations and judgments the market will make on unpublished indicators and information.
Speculation of intransitive verbs
Speculation of major market operators is also an important factor affecting the exchange rate. In the foreign exchange market, the proportion of transactions directly related to international trade is relatively low. Most transactions are honest.
It is essentially speculation, which will lead to the flow of different currencies, thus affecting the exchange rate. When people analyze the factors that affect exchange rate changes, they come to the conclusion that the exchange rate of a certain currency will rise and compete for it.
The rise of money has become a reality. On the other hand, when people expect a certain currency to fall, they will compete to sell, which will lead to a fall in the exchange rate.