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1, foreign exchange
Foreign exchange is a means of payment that can be used for international settlement in foreign currencies or in foreign currencies. Article 3 of the Regulations on the Administration of Foreign Exchange promulgated by China in 1996 stipulates the following specific contents of foreign exchange: Foreign exchange refers to: (1) foreign currency. Includes paper money, coins. (2) Foreign currency payment vouchers. Including bills, bank payment vouchers, postal savings vouchers and so on. (3) Foreign currency marketable securities. Including government bonds, corporate bonds, stocks, etc. (4) Special Drawing Rights, European Monetary Units. (5) Other foreign currency denominated assets.
2, exchange rate and list price method
Exchange rate, also known as exchange rate, refers to the price of a currency in another country, or the ratio between the currencies of two countries.
In the Forex market, exchange rates are displayed in five digits, such as:
EUR 0.9705
JPY 119.95 yen
GBP 1.5237
ChF 1.5003
The minimum unit of change in the exchange rate is a point, a numerical change in the last digit, such as:
EUR 0.0001
JPY 0.01 yen
GBP 0.0001
ChF 0.0001
In accordance with international practice, the name of a currency is usually represented in three letters, and the English word for the currency after the above Chinese name is the English code for that currency.
There are two types of price-to-price methods for exchange rates: direct pricing and indirect pricing.
(1) Direct pricing method
The direct pricing method, also known as the payable pricing method, is based on a certain unit (1, 100, 1000, 10000) of foreign currencies as the standard to calculate how many units of local currency payable. It is equivalent to calculating how much local currency is payable for the purchase of a certain unit of foreign currency, so it is called the list price method. Most countries in the world, including China, now use direct pricing. In the international foreign exchange market, the Japanese yen, Swiss franc, Canadian dollar, etc. are directly listed methods, such as the Japanese yen 119.05, or 119.05 yen to the dollar.
Under the direct pricing method, if a certain unit of foreign currency is more foreign currency equivalent than the previous period, it is indicated that the value of the foreign currency has risen or the value of the local currency has fallen, which is called the rise of the foreign exchange rate;
(2) Indirect pricing method
The indirect pricing method is also called the receivable pricing method. It is based on a certain unit (such as 1 unit) of domestic currency as a standard to calculate the receivable units of foreign currency. In the international foreign exchange market, the euro, pound sterling, Australian dollar, etc. are all indirect pricing methods. For example, the euro 0.9705 means that one euro is 0.9705 US dollars.
In the indirect pricing method, the amount of domestic currency remains unchanged, and the amount of foreign currency changes with the comparison of the value of the domestic currency. If the amount of foreign currency that can be converted for a certain amount of domestic currency is less than the previous period, it means that the value of foreign currency rises and the value of domestic currency declines, that is, the foreign exchange rate rises; conversely, if the amount of foreign currency that can be converted for a certain amount of domestic currency is more than that of the previous period, it indicates that the value of foreign currency has declined. The increase in the value of the domestic currency means that the exchange rate of foreign exchange falls, that is, the value of the foreign currency is inversely proportional to the rise or fall of the exchange rate.
The quotation in the foreign exchange market is generally a two-way quotation, that is, the bidding party quotes its own buying price and selling price at the same time, and the customer decides the buying and selling direction by himself. The smaller the difference between the buying price and the selling price, the smaller the cost for investors. The quotation spread for inter-bank transactions is normally 2-3 points, and the quotation spreads offered by banks (or dealers) to customers vary greatly depending on each situation. At present, the quotation spreads for foreign margin transactions are basically 3-5 points, and Hong Kong is 6- At 8 o’clock, domestic bank real transactions range from 10-40 o’clock.
3, the foreign exchange market
There are many kinds of financial commodity markets in the world, but they can be divided into: stock market, interest market (including bonds, commercial paper, etc.), gold market (including gold, platinum, silver), futures market (including grain, cotton, oil, etc.), options market and foreign exchange market.
The foreign exchange market refers to the trading place where foreign exchange is traded, or the place where different currencies exchange with each other. The Forex market exists because:
Trade and investment
Importers and exporters pay one currency when they import goods and charge another when they export goods. This means that they pay different currencies when they close their accounts. Therefore, they need to convert some of the currency they receive into currencies that can be used to purchase goods. Similarly, a company that buys foreign assets must pay in the currency of the state concerned, and therefore it needs to convert its own currency into the currency of the state concerned.
venture
Exchange rates between two currencies vary with supply and demand between the two currencies. A trader can make a profit by buying a currency at one exchange rate and selling it at another, more favorable exchange rate. Speculation accounts for about the vast majority of foreign exchange market trading.
hedge
Because of fluctuations in exchange rates between the two related currencies, companies that own foreign assets, such as factories, may be exposed to some risk when converting those assets into the national currency of the cost country. When the value of a foreign asset denominated in foreign currency remains the same for a period of time, a gain or loss is generated when the exchange rate changes and the value of the asset is converted into domestic currency. Companies can eliminate this potential gain or loss by hedging. This is the execution of a foreign exchange transaction, the result of which is just to offset the gains and losses of foreign currency assets arising from exchange rate movements.
The history of the foreign exchange market as an international capital speculation market is much shorter than that of stocks, gold, futures and interest markets. Today, the foreign exchange market has reached $1.5 trillion a day, far outstripped other financial commodity markets such as stocks and futures, and has become the world’s largest single financial market and speculative market.
Since the birth of the foreign exchange market, the exchange rate volatility of the foreign exchange market is increasing. In September 1985, the dollar was trading at 220 yen, while in May 1986, the dollar was trading at 160 yen, and in eight months the yen had appreciated by 27%. In recent years, the volatility in the foreign exchange market has been even greater, with the pound falling by more than 5,000 points against the dollar and by 25 per cent in just two months, to $2.0100 on 8 September 1992 and $1.5080 on 10 November. Not only that, but the daily exchange rate volatility in the foreign exchange market is also increasing, rising or falling 2% to 3% a day is commonplace. On September 16, 1992, the pound fell to $1.7850 against the dollar from $1.8755, and the pound fell 5 percent in a single day.
It is precisely because of the volatility and volatility of the foreign exchange market that more opportunities have been created for investors, attracting more and more investors to join the ranks.
