The reduction of local currency exchange rate, that is, the depreciation of local currency external ratio, can promote exports and curb imports; If the exchange rate of local currency rises, that is, the ratio of local currency to the outside world rises, which is beneficial to imports and unfavorable to exports.

From the perspective of imported consumer goods and raw materials, the decline of exchange rate will cause the domestic price of imported goods to rise. As for the impact on the overall price index, it depends on the proportion of imported goods and raw materials in the gross national product.

On the other hand, other things being equal, the price of imported goods may fall, and its influence on the overall price index depends on the proportion of imported goods and raw materials in the gross national product.

Extended data:

When a country's foreign exchange current account balance is in surplus, the supply of foreign exchange (currency) exceeds the demand of the foreign exchange market, so the local currency exchange rate rises and the foreign currency exchange rate falls; On the other hand, when a country's international expenditure exceeds its income, it will have a balance of payments deficit, which means that the supply of foreign exchange (currency) is less than the demand of the foreign exchange market, so the exchange rate of its own currency will fall and the exchange rate of foreign currency will rise.

When inflation occurs in a country, the cost of its commodities will increase, and the price of export commodities denominated in foreign currency will inevitably rise, thus weakening the competitiveness of this commodity in the international market, leading to a decrease in exports, while improving the competitiveness of foreign commodities in the domestic market, leading to an increase in imports, thus changing the current account balance.

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