Basic knowledge of foreign exchange investment

Foreign exchange investment
Foreign exchange investors need to master some basic knowledge of foreign exchange to do foreign exchange transactions. Here are two pricing methods of exchange rate pricing.
The first is the direct pricing method, which is also known as the payable pricing method, that is, the foreign currency of a certain unit (1, 100, 1000, 10000) is used as the standard to calculate how many units of domestic currency should be paid. It is equivalent to calculating how much local currency should be paid for purchasing a certain unit of foreign currency, so it is called payable pricing method. Most countries in the world, including China, adopt the direct pricing method at present. In the international foreign exchange market, Japanese yen, Swiss franc and Canadian dollar are all directly priced, such as Japanese yen 100, that is, one dollar against 100 yen.
Under the direct pricing method, if the amount of foreign currency converted into local currency of a certain unit is more than that of the previous period, it means that the value of foreign currency rises or the value of local currency falls, which is called the rise of foreign exchange rate; On the contrary, if you want to use less local currency than before, you can exchange the same amount of foreign currency, which means that the value of foreign currency falls or the value of local currency rises, which is called the decline of foreign exchange rate, that is, the value of foreign currency is directly proportional to the rise and fall of exchange rate.
The second is indirect pricing. This method, also known as the receivable pricing method, is based on the domestic currency of a certain unit (such as one unit) as the standard to calculate the foreign currency of several units receivable. In the international foreign exchange market, euro, pound sterling and Australian dollar are all indirect pricing methods. For example, euro 0.9705 means one euro to US $0.9705.
In indirect pricing method, the amount of domestic currency remains unchanged, while the amount of foreign currency changes with the change of domestic currency value. If the amount of foreign currency that a certain amount of local currency can exchange is less than that in the previous period, it means that the value of foreign currency rises and the value of local currency falls, that is, the foreign exchange rate falls; on the contrary, if the amount of foreign currency that a certain amount of local currency can exchange is more than that in the previous period, it means that the value of foreign currency falls and the value of local currency rises, that is, the foreign exchange rate rises, that is, the value of foreign currency and the rise and fall of exchange rate are inversely proportional.
The pricing method of exchange rate is a basic knowledge of foreign exchange that foreign exchange investors need to master. In the market, the price that investors see is often a two-way quotation, that is, there is a buying price and a selling price, and the price difference is the point difference, which belongs to the investor's transaction cost.

Was this article helpful?

0 out of 0 found this helpful