There are two types of exchange rate pricing methods: direct pricing method and indirect pricing method.
The direct pricing method, also called the payable pricing method, uses a particular unit (1, 100, 1000, 10,000) 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 cash is payable to purchase a particular team of foreign currency, so it is called the common 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 a particular unit of foreign currency is converted into domestic cash more than the previous period, it means that the value of the foreign currency has risen or the value of the domestic currency has fallen, which is called an increase in the 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.
The indirect pricing method is also called the receivable pricing method. It is based on a particular unit (such as 1 unit) of domestic currency as a standard to calculate the receivable units of foreign currency. The euro, pound sterling, Australian dollar, etc., are all indirect pricing methods in the international foreign exchange market. 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 number 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 money is less than that of the previous period, this indicates that the value of the foreign currency rises and the importance of domestic currency declines, that is, the foreign exchange rate declines; conversely, if the amount of foreign currency that can be converted into a certain amount of domestic money is more than that of the previous period, it indicates that the value of the 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 a 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 buying price and selling price simultaneously, 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 for inter-bank transactions usually is 2-3 points, and the quotation spreads offered by banks (or dealers) to customers vary greatly depending on each situation. Currently, the quote applies for 3-5 points for foreign margin transactions, and Hong Kong is 6- At 8 o'clock, domestic bank actual transactions range from 10-40 o'clock.