Before setting the ratio of the exchange rate to the currencies of the two countries, it is important to determine which currency to use as the criterion, which criteria to determine, which exchange rates to calculate, and which methods to rate the exchange rate to apply?
I. Direct pricing
Direct pricing is also known as price pricing. It is the exchange rate in which the national currency represents a unit of foreign currency, indicating, in general, how much currency a unit or 100 units of foreign currency will correspond to that country's currency. If the currency of your country is worth more money, the foreign currency will have less money to exchange, the exchange rate will be smaller, and, conversely, the currency will have more money to exchange and the exchange rate will be high。
Under the direct pricing method, the foreign exchange rate has been either up or down, inversely in proportion to the change in the value of the country's currency, which would decline if the currency appreciated; if the currency depreciated, the exchange rate would rise. This type of pricing is generally used by most countries, such as the united states dollar to the japanese yen, the united states dollar to the hong kong currency, the united states dollar to the renminbi, etc. Ii. Indirect pricing
Indirect pricing is also known as quantitative pricing. It means that the foreign currency represents the exchange rate of the national currency in a given unit, which is also the equivalent of the foreign currency in one unit or 100 units. If the country's currency was worth more, the amount of foreign currency that could be exchanged in the unit would be larger, as would the exchange rate. If the country's currency was worthless, the foreign currency would be reduced and the exchange rate would be small。
Under indirect pricing, the foreign exchange rate has moved in a positive proportion to the value of the country's currency, which would naturally rise if the currency appreciated; if the currency depreciates, the exchange rate falls. Such pricing methods are generally used in former commonwealth countries such as the united kingdom, australia, new zealand, etc. The exchange rates now used in the foreign exchange market are mainly the british pound to the united states dollar, the australian dollar to the united states dollar, etc。
