Exchange rate and exchange rate system to Kong Dejun 1. What is foreign exchange rate? Foreign exchange rate is the ratio, ratio or price of converting one country's currency into another country's currency; it can also be said that it is the "price of foreign currency expressed in domestic currency".

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Due to international trade and non-trade transactions, countries need to handle international settlements, so the currency of one country has an exchange rate for the currencies of other countries.

To convert the currencies of two countries, you must first determine which country's currency will be used as the standard.

Due to different determined standards, there are two pricing methods: direct pricing method and indirect pricing method.

Using 1 unit or 100 units of foreign currency as the standard and converting it into a certain amount of domestic currency is called the direct pricing method.

Under the direct quotation method, the amount of foreign currency is fixed and the amount of domestic currency changes with the changes in the value of foreign currency or domestic currency. Most countries adopt the direct quotation method.

my country adopts the indirect pricing method.

Using 1 unit or 100 units of domestic currency as the standard and converting it into a certain amount of foreign currency is called the indirect pricing method.

Under the indirect pricing method, the amount of domestic currency is fixed and the amount of foreign currency changes with the changes in the value of domestic currency or foreign currency.

The United Kingdom and the United States are both countries that adopt the indirect pricing method.

The level of exchange rate valuation is not only related to the price competitiveness of a country's export commodity trade, service trade, and technology trade in domestic and foreign markets, but also related to the international relative rate of return of a country's financial assets and the cost of foreign direct investment.

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Therefore, exchange rate is one of the important economic levers that is essential in international economic exchanges.

2. How is the exchange rate determined in the international financial market? Since the exchange rate is so important, how is the exchange rate determined in the international financial market? Generally speaking, the foreign exchange rate in the international financial market is the actual exchange rate represented by a country’s currency.

Social purchasing power parity and is determined by the market's supply and demand for foreign exchange.

Under the conditions of paper currency circulation, although the exchange rate is expressed in the form of the exchange ratio between the currencies of two or several countries, its connotation or basis for value determination essentially reflects the relative prices of commodities in different countries, that is, based on domestic and foreign prices.

Comparative purchasing power parity serves as the basis for exchange rate valuation.

Rather than the relative prices of currencies in different countries, because paper money itself is worthless.

In real life, the exchange rate is also affected by the supply and demand of foreign exchange, national defense revenue and expenditures and monetary policy.

For example, if other conditions remain unchanged, when the demand for a certain foreign currency (such as the US dollar) increases in the international financial market, its exchange rate (such as the price of the US dollar) will rise, and vice versa.

At the same time, when a country's international balance of payments has a surplus, it means that the country's foreign exchange supply increases. When other conditions remain unchanged, foreign exchange prices may fall and the domestic currency may appreciate.

On the contrary, if a country has a deficit in its international balance of payments, as the country's foreign exchange supply decreases, the foreign exchange price will appreciate and the domestic currency exchange rate will depreciate.

In addition, in real life, there are also a country's monetary policy, interest rate policy and price policy that affect exchange rate changes.

For example, when a country issues too many banknotes, causing inflation and rising prices, the result will be external devaluation of the country's currency and an increase in foreign exchange prices.

For another example, when a country raises interest rates, it will not only promote the inflow of foreign capital, but also lead to an increase in demand for the country's currency, so that the price of the country's local currency will rise; on the contrary, lowering interest rates will lead to capital outflows and the local currency will rise.

The exchange rate may depreciate.

In addition, changes in the political situation and various speculative activities will also affect changes in the exchange rate.

3. What are the main exchange rate systems in the world? Historically, there are two main exchange rate systems in the world, namely fixed exchange rate system and floating exchange rate system.

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Fixed exchange rate system Fixed exchange rate system means that the exchange rate of one country (region) currency against the currency of other countries (region) is basically fixed, and this exchange rate cannot change freely in the international currency market.

Throughout the evolution history of the international monetary system, the fixed exchange rate system can be divided into the fixed exchange rate system under the gold standard system and the fixed exchange rate system under the gold-dollar standard system.

Under the gold standard fixed exchange rate system, each currency unit has a legal gold content. The price ratio between the two currencies is the ratio of the gold content of the two currencies. This is the standard for determining currency exchange rates.

For example, before 1929, the gold content of the 1-pound gold coin specified by the United Kingdom was 113.0016 grains, and the gold content of the US dollar gold coin stipulated by the United States was 23.22 grains. The ratio of the pound to the U.S. dollar was 113.0016/23.22=4.8665, that is, 1

The British pound is equal to 4.8665 US dollars.

In the foreign exchange market, the range of exchange rate fluctuations is roughly bounded by the gold delivery point, so it is relatively stable.

With the disintegration of the gold standard, this fixed exchange rate system no longer existed.

From the post-World War II period until the collapse of the Bretton Woods system in 1973, the international world had been implementing a fixed exchange rate system under the gold-dollar standard system.