How To Distinguish The Rise And Fall Of Foreign Exchange Rate

Many friends who have little contact with foreign exchange often find it difficult to distinguish the exchange rate from their foreign exchange quotations.

For example, the US dollar to Japanese yen exchange rate has changed from 130 to 134, which can be understood as the rise of the US dollar or the decline of the yen. However, when the euro meets the US dollar exchange rate from 0.90 to 0.88, we do not understand why the value has changed from big to small.

In fact, this is due to the two pricing methods in the international exchange market, that is, the direct quotation method and the indirect quotation method.

The direct quotation method refers to the method of converting the price of a specific foreign currency into a relative number of other currencies.

The number of specific foreign currencies in the direct bid method remains unchanged while other currencies change accordingly.

For example, when the US $1 =1.5960 Canadian dollar was changed to US $1 =1.6050 Canadian dollar, the dollar increased and the Canadian dollar depreciated due to the fact that the amount of US dollar as a specific currency remained unchanged and the number of Canadian dollar increased.

When the US dollar to the Canadian dollar exchange rate changed to 1 US dollars =1.58 Canadian dollar, it indicated US dollar depreciation and Canadian dollar appreciation.

China's RMB exchange rate quotation is directly priced.

The indirect quotation method refers to the method of converting the price into a specific number of foreign currencies based on a certain number of other currencies.

The amount of other currencies in the indirect pricing method remains unchanged, and the number of specific foreign currencies varies accordingly.

Such as: 1 pounds =1.4550 US dollars to 1 pounds =1.4630 U.S. dollars, because the dollar as a specific currency increased its volume, the pound value unchanged, it shows that the depreciation of the dollar and pound appreciation.

When the pound changed to 1 pounds =1.4450 dollars against the US dollar, it showed that the US dollar appreciated and the pound depreciated.

There is no essential difference between the direct quotation method and the indirect quotation method in the application, but the form of price quotation is opposite, and the value is reciprocal.

Because of usage habits and other reasons, the indirect quotation method used in the foreign exchange market is mainly pound, euro, Australian dollar and New Zealand dollar. Most other currencies are directly priced in the exchange rate with the US dollar.