What is a Currency Exchange Rate?

Also known as "foreign exchange market or exchange rate." The ratio of one country's currency to another's currency is the price of another currency expressed in one currency. Because the names of currencies in various countries in the world are different, the currency values are different, so a currency of one country must stipulate a conversion rate, that is, the exchange rate. The exchange rate refers to the exchange price between two different currencies ^[1] . If foreign exchange is also regarded as a commodity, then the exchange rate is the price at which one currency is used to buy another currency in the foreign exchange market. For example, 1 dollar = 110 yen, which means that 1 dollar can be exchanged for 110 yen. The methods of expressing the exchange rate include direct price method and indirect price method.

Currency Exchange Rate

There are two theories to explain

The exchange rate system refers to the system generally adopted by countries to determine the exchange rate between their national currency and other currencies. The exchange rate system has specific regulations on the determination of the exchange rate and changes in the exchange rate. Therefore, the exchange rate system has a significant impact on the decision of each country's exchange rate.

Fixed exchange rate system under the gold standard system

During the 35 years from 1880-1914, major western countries adopted the gold standard system, that is, countries used gold coins with a certain quality and weight as currency in circulation. Gold coins can be

If it is an international currency, it is related to the country's economic situation, interest rates and other factors.

If it is not an international currency, it is a policy adjustment.

Take RMB as an example. RMB is not an international currency, so its interest rate is actually set artificially.

Balance of payments

Balance of payments is a country's external

The US Treasury's "International Economic and Foreign Exchange Policy Report" was finally released on Monday, local time. This semi-annual report did not list China as an exchange rate manipulator, but said it hoped that when the next report is issued, China will see greater progress in exchange rate reform. The People's Bank of China did not comment on this yesterday, but it pointed out by the China Securities Journal that when the renminbi is fully convertible, there is no clear timetable.

The US Treasury's report states that none of the United States' major trading partners have met the technical requirements defined by exchange rate manipulation, but the report makes targeted recommendations on the exchange rate policies of these countries. The recommended section is 12 pages long, while for China it is 3 1/2 pages.

The report affirmed China's "thaw" of the RMB exchange rate, but pointed out that China's new exchange rate mechanism is still quite limited. The report believes that the "flexibility" of the RMB exchange rate is insufficient to meet the needs of the Chinese economy and the global economy. Further liberalization of the exchange rate will help China implement an independent and effective monetary policy, maintain economic growth and control inflation.

The report also mentioned the joint statement of China and the United States at the China-US Joint Economic Commission, saying that China "should" keep its promise on the exchange rate issue. The report also said that it expects to see China further increase exchange rate flexibility when the next report is published, and said it will pay close attention to this.

It is worth noting that the US Treasury Department also stated in the report that it would conduct bilateral consultations with the Malaysian government on exchange rate policy. Malaysia has announced the end of its pegged exchange rate policy, and so far its currency has appreciated by only 0.8%.

The U.S. Treasury report also pointed out that due to the persistence of exchange rate risks and distortions, it will turn to the International Monetary Fund (IMF) to strengthen its role in promoting exchange reform in emerging Asian economies such as China.

After receiving the report from the United States, the IMF did not comment too much, only saying that it may further strengthen the IMF's role in monitoring foreign exchange reform in some countries at the request of the United States.

US Treasury Secretary John Snow issued a statement on Monday, stating that China s July thaw of the RMB exchange rate played an important role in the US government's confirmation that China did not manipulate the exchange rate, but China has since marketed the exchange rate formation mechanism and further liberalized its capital Progress on the market has been limited. Snow said that the next half-year report of the US Treasury Department will closely monitor the progress of China's foreign exchange reform.

The People's Bank of China did not comment on the US report yesterday. However, the Central Bank had clearly stated in the "Q & A on the RMB exchange rate reform" section of the China Securities Journal that there was no clear timetable for when the RMB would become fully convertible.