There are two types of exchange rate pricing methods: direct pricing method and indirect pricing method.
(1) Direct price method
The direct pricing method, also called the payable pricing method, uses a certain unit (1, 100, 1000, 10000) of foreign currency as the standard to calculate how many units of domestic currency should be paid. It is equivalent to calculating how much domestic currency is payable to purchase a certain unit of foreign currency, so it is called the payable price method. Most countries in the world, including China, currently use the direct pricing method. In the international foreign exchange market, the Japanese yen, Swiss franc, Canadian dollar, etc. are all directly marked, such as yen 119.05, which means that one dollar is 119.05 yen.
Under the direct pricing method, if the amount of a certain unit of foreign currency converted into domestic currency is more than that of the previous period, it means that the value of foreign currency has risen or the value of domestic currency has fallen, which is called an increase in foreign exchange rate; on the contrary, if you need to use less than the original domestic currency, it can be converted to the same The amount of foreign currency, which means that the value of the foreign currency is falling or the value of the domestic currency is rising, is called a fall in the foreign exchange rate, that is, the value of the foreign currency is proportional to the rise and fall of the exchange rate.
(2) Indirect pricing method
The indirect pricing method is also called the receivable pricing method. It is based on a certain unit (such as 1 unit) of the domestic currency as a standard to calculate several units of foreign currency receivable. In the international foreign exchange market, the euro, pound sterling, Australian dollar, etc. are all indirect pricing methods. For example, the euro 0.9705 means that one euro is 0.9705 US dollars.
In the indirect pricing method, the amount of domestic currency remains unchanged, and the amount of foreign currency changes with the comparison of the value of the domestic currency. If the amount of foreign currency that can be converted into a certain amount of domestic currency is less than that of the previous period, it means that the value of foreign currency rises and the value of domestic currency declines, that is, the foreign exchange rate decreases; conversely, if a certain amount of domestic currency can convert more foreign currencies than the previous period, it means that the value of foreign currency has declined. The increase in the value of the domestic currency means that the exchange rate of foreign exchange increases, that is, the value of foreign currency is inversely proportional to the rise or fall of the exchange rate.
The quotation in the foreign exchange market is generally a two-way quotation, that is, the bidding party quotes its own buying price and selling price at the same time, and the customer decides the buying and selling direction by himself. The smaller the difference between the buying price and the selling price, the smaller the cost for investors. The quotation spread of inter-bank transactions is normally 2-3 points, and the quotation spreads offered by banks (or dealers) to customers vary greatly depending on each situation. At present, the quotation spreads of foreign margin transactions are basically 3-5 points, and Hong Kong is 6- At 8 o'clock, domestic bank real transactions range from 10-40 o'clock.