In the foreign exchange market, there are two basic exchange rates: spot exchange rate and forward exchange rate. Spot exchange rate is used for real-time transactions, that is, both parties to the transaction exchange money immediately when the transaction is completed. Forward exchange rates are used in future currency transactions, usually to avoid exchange rate risks.
The spot exchange rate is influenced by many factors, including but not limited to:
1. Monetary policy: The monetary policies of central banks have an important impact on the exchange rate. For example, when a country's central bank raises interest rates, it usually attracts more capital inflows, leading to the appreciation of its currency.
2. Economic situation: A country's economic situation will also affect its currency exchange rate. For example, when a country's economic performance is strong, it usually attracts more investors and causes its currency to appreciate.
3. Political factors: political stability and political events will also affect the exchange rate. For example, political turmoil may cause investors to flee the country's market and devalue the country's currency.
4. Market expectation: Market participants' expectation of the future exchange rate will also affect the spot exchange rate. When the market generally expects a country's currency to appreciate, the spot exchange rate of the country's currency usually rises.
Spot exchange rate is of great significance to import and export enterprises, investors and tourists. Understanding and mastering the changing trend of spot exchange rate will help them make wise decisions in the foreign exchange market.