I. 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, it is a balance of payments deficit. The balance of payments can directly affect the change of a country's foreign exchange rate.
The balance of payments surplus will increase the foreign exchange ratio of the country's currency, and vice versa; This is the most direct factor affecting the proportion of foreign exchange.
As early as 65438+ 1960' s, British Gerson elaborated on the influence of balance of payments on foreign exchange ratio, and then mentioned portfolio theory. The so-called balance of payments is simply the import and export of goods and services and the input and output of capital.
In the balance of payments, if exports exceed imports and capital inflows, it means that the demand for the country's currency in the international market will increase, and the local currency will rise. On the other hand, if imports exceed exports and capital flows out, the demand for the country's currency in the international market will drop and the local currency will depreciate.
Second, interest rates.
As a basic reflection of a country's borrowing situation, interest rate plays a decisive role in the fluctuation of foreign exchange rate. 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 ratio.
Generally speaking, the increase of a country's interest rate will lead to the appreciation of its currency, and vice versa;
All the theories of the monetary school have discussed the role of interest rates in exchange rate fluctuations. But the most clear explanation is the interest rate evaluation theory, which emerged after the 1970s. This theory explains the exchange rate changes in the short and medium term.
The influence of interest rate on foreign exchange ratio is mainly realized through the influence on arbitrage capital flow. Under moderate inflation, higher interest rates will attract foreign capital inflows, restrain domestic demand, reduce imports and make the local currency appreciate. However, under severe inflation, interest rates are negatively correlated with foreign exchange rates.
Third, inflation.
Generally speaking, inflation will lead to a decline in the foreign exchange ratio of the country's currency, and the easing of inflation will lead to an increase in the foreign exchange ratio.
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;
The difference between price level and inflation level, under the paper money system, the proportion of foreign exchange is fundamentally determined by the actual value represented by money. According to the purchasing power evaluation, the purchasing power parity of currency is the ratio of currency to foreign exchange. If a country's price level is high and inflation rate is high, it means that the purchasing power of local currency declines, which leads to the depreciation of local currency. Instead, it tends to appreciate.
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 impact on foreign exchange holdings, but the time limit for the impact is generally short.
Although the exchange rate fluctuates ever-changing, it is the same as other commodities. In the final analysis, it is determined by supply and demand. In the international foreign exchange market, when there are more buyers than sellers of a certain currency, the buyers scramble to buy, and the buyer's power is greater than the seller's power; Sellers can live in rare goods, and prices will inevitably rise.
On the other hand, when sellers see poor sales and compete to sell a certain currency, the seller's power in the market has the upper hand and the exchange rate will inevitably fall.
Verb (abbreviation for verb) The economic growth rate of a country.
This is the most basic factor that affects the fluctuation of foreign exchange rate. According to the macroeconomic theory of Keynesian school, the growth of gross national product will lead to the growth of national income and expenditure.
The increase of income will lead to the expansion of the demand for imported products, and then expand the demand for foreign exchange and promote the depreciation of the local currency. The increase of expenditure means the increase of social investment and consumption, which is conducive to promoting the development of production, improving the international competitiveness of products, stimulating exports and increasing foreign exchange supply. So in the long run, economic growth will cause the appreciation of the local currency.
From this point of view, the impact of economic growth on foreign exchange holdings is complicated. However, if we consider the role of currency preservation, exchange psychology has another explanation. That is, the value of money depends on the subjective evaluation of money by both foreign exchange supply and demand sides, and the contrast of this subjective evaluation is foreign exchange holdings. When a country's economy is developing well, its subjective evaluation is relatively high and its currency is firm.
Market view of intransitive verbs
The so-called market view refers to the expectation and cognition of foreign exchange traders on the short-term fluctuation direction of foreign exchange holdings in the future, and the short-term fluctuation of foreign exchange holdings often reflects the market view.
Market views can be positive or negative.
When the market view of a certain currency is regarded as positive, it will be relatively strong compared with other currencies;
On the contrary, when the market view of a certain currency is interpreted as negative, it will be relatively weaker than other currencies. Foreign exchange traders will respond to market news most quickly under the known economic situation. Usually, they will consider market news and major measures that the government may announce in advance, and take actions to buy or sell before the information is officially announced.
After the news is officially announced, market views will affect the trend of foreign exchange holdings.
For example, before the government released the GDP (gross domestic product) data, the market held a fairly optimistic view, and the country's foreign exchange ratio may rise accordingly. In case the published results are lower than the market expectation, even if this data is still good news for the country's economy, the proportion of foreign exchange may still decline due to disappointing selling pressure. After the relevant news is exposed, it will affect the existing market view.
Seven, people's psychological expectations
This factor is particularly prominent in the international financial market. According to exchange psychology, the proportion of foreign exchange is the concentrated expression of subjective psychological evaluation of money by both foreign exchange supply and demand sides. If the evaluation is high and confidence is strong, the currency will appreciate.
This theory plays a vital role in explaining numerous short-term or extremely short-term fluctuations of foreign exchange rates. In addition, the factors that affect the fluctuation of foreign exchange rate include the government's monetary and exchange rate policies, the impact of emergencies, the impact of international speculation, the publication of economic data and even the impact of opening and closing.
Eight. Technical analysis
Many market participants believe that the direction of past market price movements can be used to predict future trends, so they use the information of past market price movements to trade without considering economic fundamentals or news. This method is called technical analysis.
Assuming that market participants will adopt the same strategy today as before, technical analysis can describe future market trends for investors. There are many applied theories about technical analysis, but its spirit can be summarized as the following motto: Make friends with market trends.