As a qualified foreign exchange trader, you must master the basic knowledge of the most basic currencies. How much do you know about the fundamental attributes and trend characteristics of each currency? Now let's talk about the common major currencies.
Currency characteristics of various countries:
1. Dollar
The U.S. dollar is a global hard currency, the main currency reserve of central banks, and the political and economic status of the United States determines the status of the U.S. dollar. At the same time, the United States also serves its own interests by manipulating the dollar exchange rate, sometimes at the expense of the interests of other countries. The words and deeds of the United States have a great impact on the foreign exchange market. Therefore, it is very important to measure the attitude of the United States towards the exchange rate of the US dollar from the perspective of the United States' own interests to grasp the exchange rate trend.
For example, in the "Plaza Agreement" in 1985, the United States was facing a record-breaking trade deficit caused by an excessively high dollar exchange rate, while Japanese investors held a large amount of dollar assets. So the United States put pressure on it. On the same day in September 1985, Germany, France, and Britain reached an agreement among five countries to jointly intervene in the market. Countries sold dollars, causing the dollar to fall in an orderly manner, in order to solve the problem of the huge US trade deficit. In the end, the U.S. dollar continued to depreciate sharply, and the U.S. dollar depreciated by 50% against the Japanese yen in less than three years. Japanese investors who held US dollar assets suffered heavy losses, and the sharp rise in the yen exchange rate eventually pushed the Japanese economy into a recession that lasted for more than ten years. Japan's challenge to the United States' status as the world's economic hegemony also suffered a complete defeat.
From the above example, we can see how important it is for investors to judge the real direction of the exchange rate trend by understanding the situation in the United States. Various markets in the United States are closely related, and the financial capital market is developed, which is closely connected with markets around the world. Funds for the purpose of seeking profit can flow between the foreign exchange market, the stock market, and the bond market at any time, and can also flow from domestic to foreign countries at any time. It is self-evident that this kind of capital flow has a significant impact on the foreign exchange market. For example, the rise and fall of the yield of U.S. Treasury bonds has a great impact on the U.S. dollar exchange rate, especially when the foreign exchange market focuses on the prospect of U.S. interest rates. Since treasury bonds are sensitive to changes in interest rates, changes in investors' expectations for interest rate prospects are keenly reflected in the bond market. If the yield of government bonds rises, it will attract capital inflows, and the inflow of funds will support the rise of the exchange rate, and vice versa. Therefore, investors can judge the market's expectations of interest rate prospects from the rise and fall of government bond yields, so as to make decisions on foreign exchange market investment.
2. EUR
The euro accounts for 57.6% of the U.S. dollar index, the largest proportion. Therefore, the euro can basically be regarded as the counterpart currency of the U.S. dollar. Investors can refer to the euro to judge the strength of the U.S. dollar. The proportion of the euro is also reflected in its currency characteristics and trends. Because of its large proportion and trading volume, the euro is the most stable currency among major non-US currencies. Like large-cap stocks in the stock market, it often drives the trend of European currencies and other non-US currencies and plays a leading role. Therefore, for novices entering the market, it is quite advantageous to choose the euro as the main operating currency.
At the same time, because the euro is the official currency of many countries in the European Union, and the trend is stable, the transaction volume is large, it is not easy to be manipulated, and there are few human factors. The historical trend is quite in line with technical analysis. Only from the perspective of technical analysis, it is more effective to grasp its longer trend. For breakthroughs in important points, trend lines and patterns, the reliability is relatively strong.
Both the government and the central bank of a country will intervene in the currency in line with their interests and intentions. The difference lies in their respective capabilities. The United States has a strong ability to intervene in the currency due to its national strength and influence, as well as its political structure. It can be said that basically the long-term trend of the U.S. dollar can follow the intention of the United States, while the political structure of the Eurozone is relatively dispersed, with many differences in interests and opinions. Therefore, the ability of the EU to influence the exchange rate of the euro is also greatly reduced, and it cannot be compared with the United States at all. When there is a game between Europe and the United States on the exchange rate due to differences in interests, there is no doubt that the United States has the upper hand. During the rise of the euro in 2004, the EU's verbal intervention could only have an impact on the short-term trend of the euro. There was no actual intervention in the market, because the European side knew that without the cooperation of the US side, the effect would not be satisfactory.
3. Yen
Because Japan's domestic market is small, it is an export-oriented economy, especially in the past ten years of economic recession, and exports have become the life-saving straw for domestic economic growth. Therefore, regular intervention in the foreign exchange market will prevent the yen from being too strong and maintain export products Competitiveness has become Japan's customary foreign exchange policy. The Bank of Japan is the central bank that frequently intervenes in the exchange rate in the world, and Japan’s foreign exchange reserves are among the best in the world, and its ability to intervene in the foreign exchange market is strong. Therefore, for foreign exchange market investors, it is of course necessary to pay attention to the Bank of Japan. Japan's means of intervening in the foreign exchange market are mainly verbal intervention and direct market entry. Therefore, the frequent remarks of the Bank of Japan and the Ministry of Finance officials have a great impact on the short-term fluctuations of the yen, which is what short-term investors need to focus on, and it is also the difficulty of short-term operation of the yen. Another characteristic of the yen is that once a trend occurs The market will quickly finish the whole trend directly, and rarely give investors a chance to pull back and get on the car. It is also because the Japanese economy is closely related to the world economy, especially with major trading partners such as the United States, China, and Southeast Asia. Therefore, the exchange rate of the yen is also more susceptible to external factors. For example, the growth of China's economy is increasingly important to the recovery of Japan's economy, so news of China's slowing economic growth has an increasingly negative impact on the yen exchange rate.
4. GBP
The pound sterling was once the world currency, but it is currently the most valuable currency and one of the oldest speculative currencies. Because of its high exchange rate against the U.S. dollar, the daily fluctuations are also large, especially its trading volume is far less than that of the euro, so its currency characteristics are reflected in strong volatility. As the earliest foreign exchange trading center in London, the skills and experience of its traders are top-notch, and these trading skills have been well reflected in the trend of the pound. Therefore, compared with the euro, the pound has more human factors. , especially for short-term fluctuations, the "deception" of those traders to less experienced investors can be described as "time-tested". Therefore, short-term manipulation of the pound is the touchstone to test the skills of investors, and those investors who lack experience and skills, it is best to stay away from the pound.
In addition, the discovery of North Sea oil in the UK has made it one of the few countries in the G7 that is self-sufficient in oil. The rise in oil prices has also benefited the pound to a certain extent. Compared with the yen, the cross between the pound and the yen has a better performance.
5. swiss franc
Switzerland is a traditional neutral country, and the Swiss franc is also a traditional safe-haven currency. During periods of political turmoil, it can attract safe-haven capital inflows. In addition, the Swiss constitution stipulates that every Swiss franc must be backed by 40% of gold reserves. has expired, but the Swiss franc still has a certain psychological connection with the price of gold. The rise in the price of gold can lead to a rise in the Swiss franc to a certain extent.
Switzerland is a small country, therefore, more external factors determine the exchange rate of the Swiss franc, mainly the exchange rate of the US dollar. In addition, since the Swiss franc is also a European currency, it usually follows the trend of the euro.
The currency volume of the Swiss franc is small, and in special periods, especially when political turmoil triggers a large demand for it, it can quickly push up its exchange rate and easily make its currency overvalued.
6. Australian dollar
The Australian dollar is a typical commodity currency (commodity currency is characterized by high interest rates, a high proportion of exports to GDP, a major producer and exporter of an important primary product, currency exchange rates and certain commodities (or gold prices) Changes in the same direction, etc.), Australia has an absolute advantage in the international trade of coal, iron ore, copper, aluminum, wool and other industrial products and cotton textiles, so the rise in the prices of these commodities has a great positive impact on the Australian dollar of. In addition, although Australia is not an important producer and exporter of gold, the positive correlation between the Australian dollar and gold prices is more obvious. There is also the price of oil. For example, in recent years, the international commodity futures index, which represents the prices of major commodities in the world, has been rising all the way, especially in gold in 2004. The price of oil rose sharply, pushing up the exchange rate of the Australian dollar all the way. The characteristic of the trend of the Australian dollar is that the fluctuation range is generally not as huge as that of the British pound and the US dollar, and the daily average is around 50-60 points. The trend characteristics are similar to those of the euro and are relatively stable.
In addition, the Australian dollar is a high-interest currency, and changes in the US interest rate outlook and treasury bond yields that reflect the interest rate outlook have a greater impact on it.
7. Canadian dollar
The Canadian dollar is also a commodity currency. It is the most export-dependent country among the seven Western countries. Its exports account for 40% of its GDP, and its export products are mainly agricultural products and seafood.
At the same time, the Canadian dollar is a very typical U.S. dollar group currency (the U.S. dollar group refers to those countries that have a very close relationship with the U.S. economy, which mainly includes countries that implement free trade areas or sign free trade agreements with the United States, such as Canada, Latin America, etc. China and Australia are the main representatives), 80% of its exports are to the United States, and its economic dependence with the United States is extremely high.
Canada is the only oil exporting country among the seven Western countries, so the rise in oil prices will lead to the rise of the Canadian dollar. However, in recent years, Canada's dependence on oil has been decreasing, and the relationship between crude oil and the Canadian dollar is gradually weakening, which is not as obvious as in previous years. In addition, the trend of the Canadian dollar is characterized by the fact that it is easy to suddenly walk out of a big Yin or Yang line that sets the tone of the trend, especially when fundamental events occur. Trading Canadian dollars can focus on some fundamental events such as interest rate resolutions and central bank governor speeches, which will bring you relatively generous profits.
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