The exchange rate is the price of foreign currency. Money itself is a commodity, but people are not used to treating money as a commodity.

There are four basic factors that affect exchange rate fluctuations: First, the balance of payments and foreign exchange reserves. The so-called balance of payments is the comparison between the total monetary income of a country and the total monetary expenditure paid to other countries. If the total monetary income is greater than the total expenditure, there will be a balance of payments surplus, on the contrary, there will be a balance of payments deficit. The balance of payments can directly affect a country's exchange rate. The balance of payments surplus will make the foreign exchange rate of the country's currency rise, and vice versa; Second, interest rates. As a basic reflection of a country's borrowing situation, interest rate plays a decisive role in exchange rate fluctuations. The interest rate level has a direct impact on international capital flows. Capital inflows occur in countries with high interest rates and capital outflows occur in countries with low interest rates. Capital flow will change the relationship between supply and demand in the foreign exchange market, thus affecting the fluctuation of foreign exchange rate. Generally speaking, the increase of a country's interest rate will lead to the appreciation of its currency, and vice versa. Third, inflation. Generally speaking, inflation will lead to a decline in the exchange rate of the domestic currency, and the easing of inflation will lead to an increase in the exchange rate. Inflation affects the currency value and purchasing power of the local currency, which will weaken the competitiveness of export commodities and increase import commodities. It will also have a psychological impact on the foreign exchange market and weaken the credit status of the local currency in the international market. These three aspects will lead to the depreciation of the local currency; Fourth, the political situation. Changes in the national and international political situation will have an impact on the foreign exchange market. Political changes generally include political conflicts, military conflicts, elections and regime changes. These political factors sometimes have a great influence on the exchange rate, but the influence time limit is generally short.