Foreign exchange 1. People in the foreign exchange industry say that foreign exchange is a financial asset expressed in foreign currency and can be used as a means of payment for international settlement. According to whether there are restrictions on exchange with other currencies, it can be divided into convertible currencies and incomplete convertible currencies. 2. China's foreign exchange management and RMB convertibility. Historically, China has long implemented a strict foreign exchange management system. The reform of foreign exchange management system from 65438 to 0994 improved macro-control and gradually relaxed many restrictions on micro-subjects. 1996 realized RMB current account convertibility. Exchange rate and exchange rate system 1. Exchange rate is the conversion ratio between different currencies, and it can also be understood as the price of another country's currency expressed in one country's currency. 2. Exchange rate pricing methods Direct quotation method and indirect pricing method are two basic exchange rate pricing methods. Dollar pricing method is a commonly used exchange rate pricing method in the international foreign exchange market. 3. According to different standard exchange rates, it can be divided into different categories. According to the number of exchange rates used in economic life, there is a "single exchange rate" or "multiple exchange rate" system; According to the exchange rate formation mechanism, there are market exchange rate, official exchange rate and black market exchange rate; According to whether the exchange rate can fluctuate freely with the change of market supply and demand and whether the fluctuation range is limited, there are floating exchange rates and fixed exchange rates, and so on. 4. RMB exchange rate system At present, China implements a single and managed floating exchange rate system based on market supply and demand. Exchange rate and currency value, exchange rate and interest rate 1. The intrinsic value and extrinsic value of money refer to the purchasing power level of money, which is equivalent to the reciprocal of domestic prices. External value is expressed by the exchange rate of another country's currency. According to whether it is adjusted for inflation or not, the external value of money has a nominal exchange rate and a real exchange rate. 2. In an economy with open exchange rate and interest rate, unless the monetary authorities actively adjust the supply and demand of foreign exchange or strictly control it, high interest rate will attract the inflow of monetary capital, which is conducive to the appreciation of the local currency; Low interest rates may devalue the local currency. Determination of exchange rate 1. Classical exchange rate theory (1) Coin parity theory. Refers to the period of gold coinage standard, the exchange basis of currencies in various countries is determined by coinage parity, which fluctuates slightly between gold export points and import points due to the influence of foreign exchange supply and demand. (2) International lending theory. Emphasize that the balance of payments affects exchange rate changes through the foreign exchange market. (3) Purchasing power parity theory. It is believed that the ratio of currency purchasing power in different countries determines the exchange rate. Absolute purchasing power parity is used to explain the determination basis of exchange rate, while relative purchasing power parity is used to explain the inherent law of exchange rate changes. (4) Exchange psychology. Emphasizing the influence of psychological judgment and prediction on exchange rate changes is suitable for explaining short-term exchange rate fluctuations. 2. Based on the new international economic situation, modern exchange rate theory pays attention to capital flow and money supply. (1) monetary analysis theory. It is believed that the exchange rate should be restricted by the money supply of the two countries and linked to the monetary policy. (2) Financial asset theory. The analysis of supply and demand of financial assets other than currency has fully reflected the complexity and contradiction of objective economic life. The function and risk of exchange rate 1. If the sum of exchange rate and elasticity of import and export demand is greater than 1, the depreciation of local currency can promote exports, restrain imports and improve the balance of payments. 2. The depreciation of local currency exchange rate and price will lead to the increase of domestic prices of imported goods; At the same time, it is conducive to the increase of exports, which may raise the domestic purchase price of export commodities and put upward pressure on the overall price level. The appreciation of the local currency has an opposite effect on the price. 3. The conversion of exchange rate and capital outflow into short-term capital flow is greatly influenced by exchange rate changes. If the local currency is expected to depreciate, it will be sold and snapped up in the foreign exchange market, resulting in capital flight, which will lead to the depreciation of the local currency; If the local currency is expected to appreciate, there will be a large amount of capital inflows, which will promote the appreciation of the local currency. 4. Exchange rate and output and employment As the flow and allocation of resources are changed, the change of exchange rate will indirectly affect the domestic production structure and employment level. 5. Conditions for the exchange rate to play a role Whether the exchange rate can play a role depends on the economic system, market conditions, opening up and other factors of each country. At the same time, the choice of exchange rate system and the coordination of economic policies also have important influence. 6. Exchange rate risk The uncertainty of gains and losses brought by exchange rate fluctuations to foreign exchange traders is called exchange rate risk. Import and export trade, foreign borrowing and foreign exchange reserve management are all vulnerable to exchange rate risks. Can be managed through financial derivatives.