Foreign exchange
Usually refers to various means of payment in foreign currency that can be used for international settlement. These include foreign currency, foreign currency deposits, foreign currency securities (government bonds, treasury bonds, corporate bonds, shares, etc.), foreign currency payment vouchers (bills, bank certificates, postal savings certificates, etc.). Foreign exchange is the abbreviation of international exchange rates。
Main foreign exchange varieties
Hard currency: is a currency that has strong exchange rates on the international financial market and is freely convertible, has a stable value and can be used as an international means of payment or circulation. In particular: united states dollars, pound sterling, japanese yen, euro, etc。
Soft currency: refers to weak exchange rates in international financial markets, non-convertible currencies, low creditworthiness national currencies, mainly indian rupees, vietnamese guilders, etc。
Hard and soft currencies are relative and change as a country's economic and financial situation evolves. For example, the united states dollar was a hard currency in the 1950s, a soft currency in the late 1960s to the 1970s, and since the 1980s, when the united states introduced high interest rates and tight monetary policies, the dollar became a hard currency。
The main types of foreign exchange currently traded in foreign exchange markets are the united states dollar, the euro, the yen, the pound sterling, hong kong currency, etc., which are currently highly traded and traded in foreign exchange markets; at the same time, they can be seen as barometers in foreign exchange markets, whose intense and frequent movements tend to lead to drastic changes in the entire foreign exchange market。
Exchange rate
Exchange rates are exchange prices between two different currencies. If foreign exchange is also considered a commodity, then the exchange rate is the price of purchasing another currency in one currency on the foreign exchange market. For example, usd l = jpy 110, which means that usd 1 may be exchanged for jpy 110. Exchange rates are expressed by direct and indirect methods。
Direct and indirect pricing
Direct pricing is also known as price pricing. The method is expressed in national currency as the foreign currency of a given unit. It is generally the unit or 100 unit in which the foreign currency corresponds to the national currency. The greater the value of the national currency, the smaller the value of the national currency, the smaller the value of the exchange rate, the greater the value of the national currency, and the greater the value of the national currency. Under the direct pricing method, the rise or fall in the exchange rate and the value of the national currency are inversely related: the currency appreciated, the exchange rate declined, the currency depreciated and the exchange rate rose. Most countries adopt direct pricing. Most of the exchange rates on the market are also those under the direct pricing method. For example, the united states dollar to the japanese yen, the united states dollar to the hong kong dollar, the united states dollar to the renminbi, etc。
Indirect pricing is also known as quantitative pricing. The method is expressed in foreign currency as the exchange rate of the national currency in a given unit. It is usually the amount of foreign currency that a unit or 100 units can equivalent to. The greater the value of the national currency, the greater the foreign currency, the greater the value of the national currency; and, conversely, the less the national currency is worth, the smaller the foreign currency is. Under the direct pricing method, the exchange rate rises or falls in foreign exchange and changes in the value of the national currency in a positive proportion: the currency appreciated and the exchange rate rose; the currency depreciated and the exchange rate declined. The former commonwealth countries used indirect pricing methods, such as the united kingdom, australia, new zealand, etc. Indirect pricing rates in the market are mainly the pound sterling to the united states dollar, the australian dollar to the united states dollar, etc。
Basic and cross-cutting rates
Basic exchange rate (also known as direct or base exchange rate): is generally the value of a country's currency against the united states dollar。
Cross-exchange rate: on the international market, almost all currencies have an exchange rate against the united states dollar. The exchange rate of one non-united states dollar currency against another non-united states dollar currency will often need to be hedged through these two exchange rates against the united states dollar, which are referred to as cross-cutting rates. A notable feature of the cross-exchange rate is that it involves an exchange rate between two non-united states dollar currencies。
Purchase price and offer price
The purchase price (bid rate) is the exchange rate used by banks to purchase foreign exchange from customers (the currency to which the price is stated on the left is the base currency)。
The offer (offer rate) is the exchange rate used by the bank to sell the foreign currency (the currency on the left of the bid, i. E. The base currency)。
The foreign exchange intermediate is the average of the exchange rates purchased and sold。
Computation of foreign exchange cross quotations
Response: the methodology for calculating cross-exchange rates is mainly as follows:
(1) currency of direct quotation
Buy and sell
Usd/jpy: 120. 00 120. 10
Purchase price, offer price
Dem/jpy = 66. 33 66. 43
Usd/dem: 1. 800 1. 8090
(2) currency of indirect quotation
Buy and sell
Eur/usd: 1. 1010-1. 1020
Purchase price, offer price
Eur/gbp = 0. 6873 0. 688
Gpp/usd: 1. 6010 - 1. 620
(3) currency of direct and indirect quotations
Buy and sell
Usd/jpy: 120. 10 120. 20
Purchase price
Eur/jpy = 132. 17 132. 40
Eur/usd: 1. 105 1. 1015
Fixed exchange rate
The fixed exchange rate is the exchange rate at which the exchange rate of one currency vis-à-vis that of another is essentially fixed. The international monetary system, centred on the united states dollar from the beginning of the nineteenth century to the 1930s and from the second world war to the early 1970s, was based on fixed exchange rates. The fixed exchange rate is not totally fixed, but fluctuates around a relatively fixed flat range. In the case of the post-world war ii fixed-exchange-rate system centred on the united states dollar, the international monetary fund's official exchange rate against the united states dollar is flat, and the member countries' currency exchange rates can fluctuate only by 1 per cent or less, with the intervention of central banks。
Floating exchange rates
The floating exchange rate means that the exchange rate of a country's currency vis-à-vis the other country's currency is not subject to fluctuations, but is determined by the supply-demand relationship of the foreign exchange market. On 15 august 1971, the united states introduced a new economic policy, allowing the exchange rate of the united states dollar to float freely, and by 1973 a floating exchange rate regime prevailed. It was also from that time that the foreign exchange market evolved as exchange rates continued to float。
Floating exchange rate type
The floating rates are divided into “free floating rates” and “managing floating rates” depending on whether the government intervenes or not. In real life, the government does not intervene in the exchange rate of its own currency, and there are few countries that have fully adopted free floating exchange rates. Because exchange rates have a significant impact on the balance of payments of countries and the balance of their economies, most governments control the course of exchange rates by adjusting interest rates, trading in foreign exchange markets and controlling capital movements。
Foreign exchange market
Foreign exchange markets are those involving financial institutions such as banks, self-employed traders and large multinational enterprises, linked through intermediaries or telecommunications systems, with various currencies being traded and traded. It can be tangible -- such as a foreign exchange exchange exchange or intangible -- such as inter-bank foreign exchange transactions traded through a telecommunications system. According to the latest bis statistics, the average daily turnover in the international foreign exchange market is about $1. 5 trillion。
Characteristics of foreign exchange markets
If the regional scope and peri-velocity of foreign exchange transactions are taken into account, the foreign exchange market has two fundamental characteristics, namely, spatial uniformity and time continuity。
The so-called unity of space refers to the fact that foreign exchange transactions are carried out in modern communications technologies (telephones, telegrams, telexes, etc.) in the foreign exchange markets of all countries, thus bringing them together very closely, and the world as a whole is becoming increasingly integrated into a unified world foreign exchange market。
The so-called temporal continuity refers to the rotation of the world's foreign exchange markets in terms of hours of operation, resulting in a back-to-back cycle of operations。
Main differences between foreign exchange markets and stock markets
1. Space differences
The characteristics of the foreign exchange market show that it is a global market, whereas the stock market is regional; the foreign exchange market is invisible and the stock market is tangible。
Some friends often ask, "what market is this? This is influenced by the stock market. Since the foreign exchange market is a global open market, and since there is no problem with the offer, the price we see is the most recent offer in this market. Although the tokyo market may be active at this time, there may also be traders from other regions such as new york, london, hong kong, etc., so it is difficult to determine which market the offer comes from, and it is not necessary to know。
Different standards
In stock markets, different regional markets will have different market rules and their own characteristics, but in the same market, uniform standards will be followed。
In foreign exchange markets, because of their globalization characteristics, the market is sufficiently inclusive and free to trade together, following the principles of fairness, voluntariness and integrity, with no special requirements and rules。
3. Different forms of transaction
The standardized stock market is conducted by pooling and pooling, reflecting absolute fairness, so that there can be no different exchange prices for the same stock at the same time。
All buyers and sellers in the foreign exchange market are completely open, reflecting absolute freedom, the buyer is free to ask for the price, the seller is free to offer the price, the parties deal exclusively on a voluntary basis, and the foreign exchange market does not have rules for pooling bids and pooling computers。
Main players in foreign exchange markets
Response: participants in the foreign exchange market mainly include central banks, commercial banks, non-bank financial institutions, brokers, self-employed and large multinational enterprises. They trade frequently and in large amounts, each amounting to several million dollars or more. Participants in foreign exchange transactions can be classified as investors and speculators for the purposes of their transactions。
Foreign exchange market generation
Response: in the contemporary world economy, international economic and trade flows are not for any country to leave. Along with the international movement of goods, services and capital, monetary movements across national borders to make payments are inevitable. International economic transactions form the supply of and demand for foreign exchange, which leads to foreign exchange transactions, while the place where foreign exchange transactions take place is known as the foreign exchange market. As the trend towards global integration of the world economy has intensified, international foreign exchange markets have become increasingly interconnected。
Main global foreign exchange markets
At present, there are more than 30 major foreign exchange markets in the world, located in different countries and regions on all continents. According to the traditional geographical division, there are three major segments: asia, europe, north america, the most important of which are london, frankfurt, zurich and paris in europe, new york and los angeles in the americas, sydney in australia, tokyo, singapore and hong kong in asia。
Each market has its fixed and unique characteristics, but all have common features. Markets are isolated from distance and time, and they are sensitive and independent. One centre passes orders to another every day after operating, sometimes setting the tone for the opening of the next market. These foreign exchange markets are centred on the cities in which they are located, and they radiation other countries and regions surrounding them. Owing to the different time zones in which foreign exchange markets operate, they are connected to each other through sophisticated communication equipment and computer networks, market participants can trade around the world, foreign exchange flows are smooth and exchange rates vary minimally between markets, creating a single international foreign exchange market that operates globally in an integrated manner and operates 24 hours a day. This can be summarized as follows:
Region
Urban
Opening time (gmt)
Gmt
Asia
Sydney
11:00
19:00
Tokyo
12 noon
20:00
Hong kong
1300
21:00
Europe
Frankfurt
8:00
16:00
Paris
8:00
16:00
London
9 am
17:00
North america
New york
12 noon
20:00
The world's largest foreign exchange centre - london
London is the oldest international financial centre in the world, and the formation and development of the london foreign exchange market is the world's oldest. Long before the great war, the foreign exchange market in london had grown in size. In october 1979, british foreign exchange controls were completely removed and the london foreign exchange market developed rapidly. There are about 600 banks in the financial city of london, where almost all major international banks have branches and are very active in the london market. Because of its unique geographical location, where it is located at the intersection of two great time zones, connecting asia with north american markets, where the opening of the market coincides with the closing of the market, new york is the beginning of a working day, this period is exceptionally active, with london becoming the world's largest foreign exchange trading centre, with important implications for the overall foreign exchange market dynamics。
North america's most dynamic foreign exchange market — new york
After world war ii, new york became the clearing house for the world dollar, as the dollar became a world currency for reserves and clearing. The new york foreign exchange market has rapidly evolved into a fully open market and is the world's second largest foreign exchange trading centre. At present, over 90 per cent of the world's dollars are collected through the “banking clearing system” in new york, so that the new york foreign exchange market has an increasingly consolidated position with functions of dollar clearing and transfer that cannot be replaced by other foreign exchange markets. At the same time, the importance of the new york foreign exchange market is also reflected in its important impact on exchange rate trends. Exchange rate movements on the new york market were more intense than in the london market, mainly for three reasons: the economic situation in the united states had a significant impact on the world; the various financial markets in the united states were well developed, with stock, debt and remittance markets interacting and interconnected; and the speculative forces, mainly american investment funds, were very active, contributing to exchange rate fluctuations. As a result, exchange rate changes in the new york market have received particular attention from global foreign exchange traders。
Asia's largest foreign exchange market - tokyo
Tokyo is the largest foreign exchange trading centre in the asian region. Japan introduced strict financial controls before the 1960s, and in 1964 it joined the international monetary fund (imf) to allow free exchange of the yen, and the tokyo foreign exchange market began to develop. After the 1980s, the tokyo foreign exchange market grew with the rapid growth of japan's economy and its position in international trade。
Since the 1990s, trading in the tokyo foreign exchange market has been depressed by the collapse of the japanese bubble economy. The transactions on the tokyo foreign exchange market are dominated by the united states dollar to the japanese yen. Japan is a large trading country, and the trade demand of importers and exporters has a greater impact on exchange rate fluctuations on the tokyo foreign exchange market. As exchange rate changes are closely related to japan's trade situation, the central bank of japan is extremely concerned about the fluctuations in the exchange rate between the united states dollar and the japanese yen and intervenes frequently in the foreign exchange market. This is an important feature of the tokyo foreign exchange market。
