How to judge the rise and fall of foreign exchange rates? How do you look at the rise and fall of foreign exchange rates? Where to judge? Generally, investors who have just started foreign exchange transactions do not have a deep understanding of foreign exchange. Therefore, when encountering foreign exchange quotations, it is difficult to distinguish between the rise and fall of foreign exchange, which leads to not knowing how to stop the quotation.
How to judge the rise and fall of foreign exchange rates? How do you look at the rise and fall of foreign exchange rates?
For example, the USD/JPY exchange rate has been changed from 130 to 134. Understandably, this is called a rise in the dollar or a fall in the yen. However, when the exchange rate of the euro to the dollar changed from 0.90 to 0.88, I did not understand why the value changed from large to small. Call it a fall in the euro or a rise in the dollar. In fact, this is caused by two pricing methods (namely direct pricing and indirect pricing) in the international foreign exchange market.
Direct pricing method refers to a pricing method that uses a certain amount of a specific foreign currency as a standard and converts it into a relative amount of other currencies. The amount of specific foreign currencies in the direct pricing method remains unchanged, while other currencies change accordingly. For example, when 1 U.S. dollar = 1.5960 Canadian dollars becomes 1 U.S. dollar = 1.6050 Canadian dollars, since the U.S. dollar is the same as a specific currency, and the Canadian dollar appreciates, it means that the U.S. dollar appreciates and the Canadian dollar currency depreciates. When the U.S. dollar to Canadian dollar exchange rate becomes 1 U.S. dollar = 1.58 Canadian dollars, it means that the U.S. dollar depreciates and the Canadian dollar appreciates. Our country’s currency exchange rate uses a direct pricing method.
The indirect pricing method refers to a pricing method that uses a certain amount of other currencies as a standard and converts it into a relative amount of a specific foreign currency. In the indirect pricing method, the quantity of other currencies remains the same, while the quantity of specific foreign currencies changes accordingly. For example, when 1 pound = 1.4550 U.S. dollars becomes 1 pound = 1.4630 U.S. dollars, the value of pound sterling remains unchanged due to the increase in the number of dollars as a specific currency. When the exchange rate of the British pound to the U.S. dollar becomes 1 pound = 1.4450 U.S. dollars, it means that the U.S. dollar has appreciated while the British pound has depreciated.