What is foreign exchange? Can foreign exchange be invested?

What is?foreign exchangeAnd the foreign exchange market?

Foreign exchange(Foreign ExchangeorForex)It refers to the foreign currency held by a country and the means of payment expressed in foreign currency for international settlement.

If you have experience of traveling or studying in another country in the past, then you are actually involved in trading in the foreign exchange market. Because when you need to step out of the country, you often need to exchange the currency of the destination country, and the foreign currency exchange rates of different countries will be displayed during the exchange.

You will find that holding 10000 RMB can actually be exchanged15Ten thousand Japanese yen, and if you hold ten thousand US dollars, converting it into Japanese yen is truly a 'millionaire'. When you return to your home country and prepare to exchange the unused currency, you will find that the exchange rate has changed. During this process, the change in exchange rate is actually the reason why investors can make money in foreign exchange market transactions.

Buying currency is equivalent to purchasing shares of a country, which can be understood as purchasing shares of a listed company. The price of the currency you purchase directly reflects the market's judgment of a country's current and future economic conditions. Generally speaking, the exchange rate between a country's currency and other countries' currencies reflects the comparison of their economic conditions with other countries. For example, when you buy Japanese yen, it is equivalent to buying "a share" for the development of the Japanese economy, optimistic about its development. When the Japanese economy performs well, you can sell these "shares" to the market and profit from it.

The foreign exchange market is the largest financial trading market in the world, and the average flow of funds every day is far more than that of stocks, bonds and other financial markets. Compared with the daily trading volume of the New York Stock Exchange and Shanghai Stock Exchange, the daily trading volume of the foreign exchange market occupies absolute advantage. It is a24A globally integrated market that operates 24/7, with central banks, foreign exchange banks, brokers, and customers all participating in the international foreign exchange market, trading between different currencies in this market.

The foreign exchange market can be divided into horizontal and vertical markets. Horizontal markets are based on the global concept and are divided into globally renowned financial centers and foreign exchange centers such as the London market, New York market, Tokyo market, Paris market, Singapore market, etc. The connections and impacts between these different markets form a global foreign exchange network. Under the effect of time and time difference, this horizontal market opens and closes one after another, forming a circular pattern24HourlyForeign exchange transactionsMarket.

The vertical market is the transaction architecture system of the entire foreign exchange market, from customers, speculators, commercial banks, traders, and so onECNSystems, hedge funds, market makers' banks, central banks. The foreign exchange market is composed of the retail market and the interbank market, but due to the relatively small size of the retail market, the commonly referred to foreign exchange market generally refers to the interbank market. If you find the risk and difficulty of investing in foreign exchange relatively high, there are also many private equity funds available for investors to choose from on the private equity ranking website that does not charge subscription fees.

　　Factors affecting foreign exchange market

As a manifestation of the external price of a country's currency, the foreign exchange rate is influenced by domestic and international factors. Exchange rate fluctuations are caused by various factors, and the factors that affect the foreign exchange market can be mainly divided into the following:

First, the impact of balance of payments

As a cross national currency market transaction, its price is easily affected by the balance of payments. International balance of payments refers to the total amount of income and expenditure incurred by a country's economic transactions with foreign countries over a certain period of time, which is a record of economic exchanges between countries.

Secondly, the impact of inflation

The difference in domestic and international inflation is the dominant factor determining the long-term trend of exchange rates. Under unfulfilled credit currency conditions, the ratio between two countries is usually determined by the values they represent. If a country's inflation rate is higher than other countries, its currency will tend to depreciate in the foreign exchange market;If its inflation rate is relatively low compared to other countries, the currency will tend to appreciate in the foreign exchange market.

Thirdly, the impact of market expectations

In the international financial market, there is a huge amount of hot money operating, which is highly sensitive to the political, military, and economic conditions of various countries. The market expectations it generates also to some extent dominate the flow direction of hot money. Due to its large amount, it is also easy to cause significant impacts on the foreign exchange market. From a short-term perspective, market expectations are the most important factor affecting the foreign exchange market.

Fourthly, the influence of currency management authorities

The trend of exchange rates reflects a country's economic expectations. In order to maintain exchange rates at the level expected by the government, monetary authorities in various countries may intervene directly in the foreign exchange market at certain times, in order to make changes to the supply and demand situation of the foreign exchange market. From a long-term perspective, although this policy intervention cannot fundamentally change the long-term trend of exchange rates, it has a very important impact on the trend of foreign exchange in the short term.