The foreign exchange market has always been considered a game played by bankers, but foreign exchange can also enrich your investment portfolio. When other investment varieties around the world are entering a low period, the foreign exchange market provides investors with countless opportunities.
Therefore, it is very useful for any trader, investor or investment manager to know a little about foreign exchange and the fundamental principles behind it.
So in the foreign exchange market, what are the eight mainstream currencies of foreign exchange? What types of currencies are used for international debt settlement? Which are the central banks of the corresponding countries for each currency? Let us introduce today.
We learned that the Bank for International Settlements (BIS) publishes the foreign exchange survey report every three years. According to the survey of nearly 1,300 banks and their financial institutions in 53 major countries, the US dollar still maintains its dominant position as a global currency, accounting for 88% of all transaction currencies; the share of euro transactions has increased, reaching 32%. In contrast, the Japanese yen fell by about 5%, but is still the third most actively traded currency (accounting for 17%); followed by the British pound (13%), the Australian dollar (7%), and the Canadian dollar (5%) and the Swiss franc (5%).
01
U.S. dollar (USD)—the king of currency,
the U.S. dollar is the hard currency in the world, and the main currency reserve of central banks of various countries.
USD features:
The dollar is issued by the United States, the largest economy in the world. Like any other currency, the dollar is also supported by the fundamentals of the U.S. economy, including: GDP, manufacturing data, employment reports, etc. In addition, the central bank (Fed) and any interest rate-related policy announcements have a major impact on the dollar, such as raising or lowering interest rates, unconventional monetary policies, and speeches by important officials such as the chairman of the Federal Reserve.
In trading, the dollar is a benchmark against other major currencies, notably the euro, yen and British pound.
Dollar Influencing Factors:
1. U.S. central bank policy. The central bank of the United States, also known as the Federal Reserve, can issue important monetary policies. The data it publishes directly guides the changes in the interest rate of the US dollar, thereby causing changes in the US dollar index. This is why the recent interest rate hike by the Federal Reserve has become the focus of public attention. It can directly Determine the general direction of the US dollar index.
2. Speech by the U.S. Department of the Treasury. The U.S. Treasury Department can designate the U.S. fiscal budget and has first-hand data information. The speeches of the Treasury Department often become the focus of people's discussions, which is also a guiding basis for the trend of the US dollar index.
3. U.S. bonds. Although bonds have no direct relationship with the US dollar exchange rate, since inflation can affect the price changes of bonds, it may affect the degree of pressure on the US dollar to varying degrees.
4. Stock index. Judging from historical data, several stock indexes headed by the Dow Jones Industrial Index are directly related to the exchange rate of the US dollar.
5. Bank of America abroad. It refers to the U.S. banks opened in other places, because people make an assessment based on the exchange rate of the local U.S. bank. This exchange rate difference can also affect the public's consideration of the value of the U.S. dollar, thereby affecting the exchange rate of the U.S. dollar.
6. Other factors. There are also some factors that can also have an impact on the exchange rate of the US dollar, including the monthly non-agricultural data and the consumer confidence index, which is also a measure of the value of the US dollar.
These factors are important indicators that affect the U.S. dollar index. Mastering the changes in these factors can basically judge the changes in the U.S. dollar index. This is the direction to focus on when investing in U.S. dollar-related currency pairs.
Central bank: U.S. Federal Reserve (Fed)
Created under the authority of the Federal Reserve Act of 1913, the Federal Reserve System (also known as the Federal Reserve) is the central banking institution of the United States consisting of the Federal Reserve Board and 12 Federal Reserve banks together. The U.S. Federal Reserve is headed by a chairman and board of governors, with the central bank's main focus on its branch, the Federal Open Market Committee (FOMC). The function of the Federal Open Market Committee is to monitor open market operations and formulate monetary policy and interest rate policy.
The current Federal Open Market Committee consists of 12 members, of which 7 are members of the Federal Reserve Board, and the other 5 are selected from the 12 current Federal Reserve Bank presidents (chairmen). Among the 5 chairmen, the New York Fed Chairman is a permanent member. committee member. The FOMC meets every six weeks. Although there are only 12 voting members in each FOMC meeting, other Fed chairmen are invited to participate in each meeting to discuss the current economic situation and express their views. Since each member has different views on the economy or monetary policy, the remarks on monetary policy are divided into "hawks" or "doves". The so-called hawks refer to the faction that tends to tighten monetary policy; Commissioners who continue to maintain an accommodative policy.
02
Pound Sterling (GBP) - The Queen's currency,
the pound sterling, is issued primarily by the Bank of England, but there are other issuers. GBP is more liquid and can be traded throughout the day.
GBP Features:
Sterling can fluctuate by 100-150 basis points, with fluctuations of 20 basis points being rare. Exchange rate volatility is more pronounced in some cross currencies, such as GBP/JPY and GBP/CHF, which are often watched by traders.
As a result, the pound is arguably the most volatile currency during the London and US hours, but it is less volatile during the Asian session (5pm ET to 1am ET).
Factors affecting the British Pound:
1. The impact of economic data. The main economic data in the UK include: initial unemployment rate, initial unemployment, average income, retail price index excluding mortgage loans, retail sales, industrial production, GDP growth, etc., which will greatly affect the pound.
2. Three-month European pound deposit futures. That is, the short-term British pound (three-month European pound futures contract), the futures contract price reflects the market's expectations for the European pound deposit rate three months later. Fluctuations in the prices of contemporaneous futures contracts with other countries may also lead to changes in the exchange rate of the pound.
3. Interest rate. The central bank's main interest rate is the minimum lending rate (prime rate). In the first week of each month, the central bank will use interest rate adjustments to send a clear monetary policy signal to the market. Changes in interest rates generally have a greater impact on the pound. The Bank of England will also set monetary policy by adjusting daily the interest rate on government bonds purchased from discount banks (designated financial institutions dealing in money market instruments).
4. The pound exchange rate is as sensitive to exchange rates as other currencies. Changes in sterling interest rates usually have a large impact on the pound exchange rate.
5. The Financial Times 100 Index. The UK's main stock index, the FTSE and the US Dow Jones, are closely linked.
6. The relationship between the pound and the European Economic and Monetary Union. If the UK wants to join the euro zone, the UK interest rate level must be lowered to the euro interest rate level. If the public votes to join the eurozone, the pound must be devalued against the euro in order to develop domestic industrial trade. Therefore, any talk of the UK's possible entry into the euro zone will depress the pound.
7. Gilts are British government bonds. Likewise, the gap between the 10-year gilt yield and the yield on other national bonds or US Treasuries over the same period can affect the exchange rate of the pound and other currencies.
8. 3-month Euro GBP deposit. Sterling deposits placed with non-UK banks are called Europound deposits. The difference between its interest rate and the deposit interest rate of other European countries in the same period is also one of the factors affecting the exchange rate.
9. Monetary Policy Committee. This committee is mainly responsible for setting interest rate levels.
Central Bank: Bank of England (BOE)
The Bank of England, also known as the Bank of England, is the central bank of the United Kingdom and is the monetary authority of the United Kingdom, just like the Federal Reserve. Likewise, the Bank of England has established a committee headed by the governor. The committee consists of nine members, including four external members (appointed by the Minister of Finance), a chief economist, a director of market operations, a committee chief economist and two deputy governors.
The Bank of England's Monetary Policy Committee (MPC) meets monthly to discuss determining interest rates and monetary policy, with the committee's primary objective being price stability. The consumer price inflation benchmark set by the MPC is 2%. If the inflation does not meet this benchmark, the governor is obliged to notify the Chancellor of the Exchequer by letter. For example, in 2007, the British CPI rose sharply to 3.1%. The release is an omen for the market, which often means that the probability of monetary tightening will increase, that is, interest rate hikes.
03
Euro (EUR) - The dollar's counterpart currency,
the euro, is managed by the European Central Banking System, which consists of the European Central Bank and the central banks of the countries in the euro zone. The euro continues to raise interest rates to accelerate the appreciation of the euro, the euro continues to hit new highs, and the trend is standardized and stable. Those who are new to the foreign exchange market can pay attention.
Features of the Euro:
The dollar's counterpart, EUR/USD, has been more subdued relative to sterling and the Australian dollar. The average daily fluctuation range of EUR/USD is between 30-40 basis points, and the larger fluctuation is generally only 60 basis points. Another thing to consider is time, because the foreign exchange market is open 7*24 hours, foreign exchange traders must strategically formulate trading schedules.
EUR/USD is actively traded during London and US hours (2pm-11pm ET).
Factors affecting the euro:
1. The monetary policy of the European Central Bank. The monetary policy of each country's government is the leading factor that guides the change of the country's exchange rate. The promulgation of monetary policy is mainly to stabilize the country's currency price. If the currency price does not meet the expectations of the central bank, the central bank can issue a certain monetary policy to control the market. The effect of monetary policy is often reflected in the consumer price index. In addition, the central bank can also affect the exchange rate changes of the euro by controlling the money supply of currency growth.
2. Interest rate decision. The interest rate decision is also a major decision-making meeting held by the European Central Bank. It is generally held on Thursdays every two weeks, and a press conference is held after the first meeting of each month to announce new monetary policies and new interest rate targets. This is why the European Central Bank's decision a few days ago has become the focus of everyone's attention, and it plays a key role in Huimin's investment direction.
3. Euro interest rates outside the euro zone. This means that the difference between the interest rate of euro deposits stored outside the euro area and the local interest rate of the euro area will become a standard for investors to evaluate the euro exchange rate, which will guide investors' analysis and judgment.
4. The role of economic data. Economic data is a key factor in fundamental analysis. Economic data is an important indicator of the value of the euro. Relevant data, including GDP, HCPI and fiscal deficit, can become a direction that affects people's judgment on the trend of the euro exchange rate. They It is also a reference for investors to analyze how the euro exchange rate will develop.
5. Political factors. We all know that political factors will also play a decisive role in the exchange rate of the euro, and EUR/USD is most susceptible to political factors.
The above are several main factors that affect the exchange rate of the euro. As long as investors can basically grasp the development of these factors, they can basically grasp the development of the currency pairs related to the euro.
Central Bank: European Central Bank (ECB)
Headquartered in Frankfurt, Germany, the European Central Bank is the central bank for the 17 member states of the euro area. Similar to the Federal Reserve, the European Central Bank has an executive committee, which is an institution responsible for formulating monetary policy. It consists of five members. The central bank chairs of the four economies in China include: Germany, Italy, France, and Spain. The reason for this arrangement is that the largest economies are most represented, which prevents adverse effects due to management changes. The Executive Committee meets approximately ten times a year.
The ECB issues currency according to circumstances. Like the Fed, monetary policy makers can step in at any time when problems arise in the banking or monetary system. There are also differences between the ECB and the Fed: the Fed's goal is maximum employment and long-term interest rate stability, while the ECB's primary goal is price stability, followed by general economic policy. Therefore, when the ECB sets interest rate policy, it will focus mainly on consumer inflation.
04
Canadian dollar (CAD)—an energy currency
, the Canadian dollar is also a commodity currency. It is greatly influenced by the policies of the United States and is suitable for long-term investment.
Canadian Dollar Features:
The daily fluctuation range of the Canadian dollar is within 30-40 basis points. The trend of many currencies is consistent with the price trend of commodities. For the Canadian dollar, it has a certain correlation with the trend of crude oil. Canada is a major commodity As a commodity exporter, many traders and investors use the Canadian dollar to hedge existing commodity positions or to speculate when they follow the crude oil market signals.
Factors affecting the Canadian dollar:
1. The strength of the US economy. The Canadian dollar is unique in that there is more bilateral trade between Canada and the United States than between any other two countries. 80% of Canada's exports go to the United States, so the Canadian dollar exchange rate is closely related to the strength of the US economy.
2. Commodity currency. The Canadian dollar is also considered a "commodity currency" because about half of Canada's exports come from the export of goods. However, most of these commodities are non-energy commodities, so the Canadian dollar exchange rate is more affected by changes in the prices of non-energy commodities. Rising oil prices can put pressure on the Canadian dollar, as it weakens the Canadian dollar's purchasing power.
3. The Central Bank of Canada. The Bank of Canada's main goals are "low and stable inflation" and a "safe and reliable exchange rate." The Bank of Canada's board of directors is made up of the governor, deputy governors and 12 other directors. In addition, the Deputy Chancellor of the Exchequer also attends board meetings but has no voting rights. The president and vice president are appointed by the directors for a term of 7 years and can be re-elected. Directors are appointed by the Chancellor of the Exchequer. If the Chancellor of the Exchequer and the Bank of Canada disagree on monetary policy, the Chancellor of the Exchequer, after consultation with the Governor, may submit a written notice to the Governor that the Governor must implement.
4. Monetary policy. It was not until November 2000 that the Bank of Canada began to introduce the new system of monetary policy meetings, that is, to determine the dates of eight monetary policy meetings each year in advance and announce the content of monetary policy on the day of the meeting. Previously, the Bank of Canada could adjust interest rates on any business day. Rate decision results are usually announced at 9:00 a.m. (local time) on a Tuesday or Wednesday.
5. Interest rate. The key interest rate in Canada is the overnight or cash rate, which is the benchmark for the rate at which banks lend money between banks. The "Bank of Canada Rate", 50 basis points above the overnight rate range, is the rate that Canadian banking institutions pay to the Bank of Canada when they hold funds overnight using the Large Funds Transfer System.
Central Bank: Bank of Canada (BOC)
The Bank of Canada was established in 1934 under the authority of the Bank of Canada Act. As the central bank of Canada, its main goals are to maintain stable low inflation, a safe monetary environment, financial stability and efficient management of government funds and debts. The Bank of Canada, like the Swiss National Bank, is characterized by a high degree of independence, as the Bank of Canada is sometimes viewed as a corporation in which the Canadian Ministry of Finance holds a direct stake. Although closely tied to the government, the governor's primary role is to promote price stability, so the Bank of Canada governor also takes the government into account when approaching the management of monetary policy. Because it has an inflation target of 2%-3%, the Bank of Canada favors tight monetary policy rather than easing when prices go awry.
05
Swiss Francs (CHF) - Bankers' currency
The Swiss Franc is a hard currency. The Swiss franc is the legal tender of Switzerland and Liechtenstein. It is issued by the Swiss central bank. The Swiss franc will be used as a safe-haven currency.
Swiss franc features:
There is some correlation between the euro and the Swiss franc. Similar to the euro, the Swiss franc is less volatile in any time period, with an average daily fluctuation range of 35 basis points. The most frequently traded CHF is during the London session (2am-8am ET).
Factors affecting the Swiss franc:
1. Interest rate. Changes in interest rates in each country may directly lead to political changes. These changes have a great impact on the currency. Investors can pay more attention to the interest rate in a country during the investment process.
2. Three-month deposit. In the process of investment, if we put the currency in a bank that is not in Switzerland, it can generally be called a European Swiss franc deposit, and the difference between its interest rate and the interest rate of other countries may also directly affect the exchange rate.
3. Safe-haven currencies. In fact, the Swiss franc has been regarded as a risk-averse currency since a long time ago. This is an independent policy set by snb. Snb has a very sufficient amount of gold, which is of great help to the stability of the currency.
4. Economic data. Some economic data in Switzerland can actually directly affect the exchange rate of the Swiss franc, such as the unemployment rate there, the consumer price index, etc. These series may lead to the exchange rate of the Swiss franc. The exchange rate falls or rises.
5. Cross exchange rate impact. Like other currencies, if the cross exchange rate changes, it will have a great impact on it.
6. Futures contracts. In fact, the price of the futures contract reflects the expectation of the franc deposit rate three months later in the current market. In fact, the price difference with other countries can also affect the market. Its exchange rate change.
Central Bank: Swiss National Bank (SNB)
Unlike other central banks, the SNB (Swiss National Bank) is a government agency that is privately and publicly owned. This means that the SNB is technically a specially regulated company. As a result, only half of the SNB is owned by the Swiss sovereign state, while the rest is privately owned. The policy focus of the SNB Governing Council is to maintain economic and financial stability. Compared with other monetary decision-making committees, the monetary policy of the Swiss National Bank is only decided by the heads of three major banks, the number is the smallest, and the three are responsible for forming the council, which will hold a meeting every quarter.
The Swiss National Bank Council determines an interest rate range (floating 25 basis points above and below a certain level), and the interest rate will operate within this range.
06
Yen (JPY) - technically complex
Japan is an importer of raw materials and semi-finished products, especially oil, so the Bank of Japan intervenes more in its currency, so its government hopes that the depreciation of the yen will increase its competitiveness in the international market.
Yen features:
The Japanese Yen is often used as a currency for carry trades. Yen rates are lower for some high-yielding currencies, notably New Zealand's New Zealand dollar, Australian dollar and British pound. Thus, this pattern of spreads drives forex traders to find trading opportunities from a technical perspective in the long run. The average daily fluctuation range of USD/JPY is 30-40 basis points, and the maximum can reach 150 basis points. ).
Factors affecting the yen:
1. The Japanese Ministry of Finance is the only department in Japan that formulates fiscal and monetary policies. The Japanese treasury has more influence over the currency than the U.S., British or German treasuries. Officials of the Japanese Ministry of Finance often make some remarks on the economic situation, and these remarks generally affect the yen. For example, when the yen appreciates or depreciates against the fundamentals, the officials of the Ministry of Finance will verbally intervene.
2. The Bank of Japan. In 1998, the Japanese government passed a new law allowing the central bank to formulate monetary policy independently of the government, while the yen exchange rate remains in the hands of the Ministry of Finance.
3. Interest rate. The overnight lending rate is the main short-term interbank rate and is determined by the BOJ. The BOJ also uses this rate to express changes in monetary policy and is one of the main factors affecting the exchange rate of the yen.
4. Japanese government bonds. In order to enhance the liquidity of the monetary system, BOJ purchases 10-year or 20-year JGBs every month. The yield of 10-year JGB is regarded as a benchmark indicator for long-term interest rates. For example, the basis difference between 10-year JGBs and 10-year US Treasuries is seen as one of the factors driving the direction of USD/JPY interest rates. Falling JGB prices (i.e. rising yields) are generally positive for the yen.
5. Department of Economic and Fiscal Policy. On January 6, 2001, it officially replaced the original Economic Planning Agency (EPA). Responsibilities include articulating economic plans and coordinating economic policies, including employment, international trade and foreign exchange rates.
6. Economic data. More important economic data include: GDP, Tankan survey (quarterly business climate status and expected survey), international trade, unemployment rate, industrial production and money supply (M2+CDs).
7. Nikkei 255 Index. Japan's main stock market index. When Japan's exchange rate falls reasonably, it will increase the stock prices of export-oriented companies, and at the same time, the entire Nikkei index will also rise. Sometimes, this is not the case, and when the stock market is strong, it will attract foreign investors to use the yen to invest in Japanese stocks, and the yen exchange rate will also be pushed up.
8. The impact of cross exchange rates. For example, when EUR/JPY rises, it will also cause USD/JPY to rise. The reason may not be due to the rise of the US dollar exchange rate, but due to different economic expectations for Japan and Europe.
Central Bank: Bank of Japan (BOJ)
The Bank of Japan was established in 1882. The Bank of Japan controls monetary policy, such as: currency issuance, money market operations, and economic data analysis. The main institution of the Bank of Japan is the Monetary Policy Committee, whose main responsibility is to maintain economic stability. The Bank of Japan often exchanges opinions with the Japanese government, but at the same time maintains its independence and transparency. The BOJ meets 12-14 times a year and has a governor who leads a nine-member monetary policy committee, including two appointed vice-governors.
07
New Zealand dollar (NZD) - the favorite of arbitrageurs
New Zealand dollar, also known as New Zealand dollar, is issued by the Central Bank of New Zealand (Reserve Bank of New Zealand) and implements managed free floating. A package of currency decisions.
New Zealand dollar features:
The New Zealand dollar is one of the world's major commodity currencies and will be affected by global commodity prices, such as gold prices and crude oil prices, which will have an impact on the New Zealand dollar. And New Zealand's animal husbandry is relatively developed, so the price of dairy products will have a great impact on the exchange rate of the New Zealand dollar.
Factors affecting the New Zealand dollar:
1. The Australian dollar has a strong correlation. Australia is New Zealand's largest trading partner. The proximity of the two countries, coupled with New Zealand's highly trade-oriented economy, has created strong ties between the two countries. When Australia's economy is doing well, Australian companies also increase their import business. New Zealand is the first beneficiary. In fact, there has been a close to 97% positive correlation between the two currency pairs over the past 5 years.
2. The currency associated with the commodity. New Zealand is an export-oriented economy, with merchandise exports accounting for more than 40% of the country's exports. This resulted in a positive 50% correlation between the New Zealand dollar and commodity prices. When commodity prices rise, the New Zealand dollar also tends to rise. The correlation between the Australian and New Zealand dollars stems from the fact that they are both commodity-linked currencies. However, the New Zealand dollar's correlation with commodity prices is not limited to its trade activity. In fact, Australia's economic performance is also highly correlated with commodity prices. So when commodity prices rise, Australia's economy benefits and all parts of the nation's economy increase business, including trade with New Zealand.
3. Carry trade. The New Zealand dollar has one of the highest interest rate currencies in the industrialized world and it has traditionally been one of the most used currencies in the carry trade. A carry trade involves buying or lending a high-interest currency and selling or borrowing a low-interest currency. The popularity of the carry trade has helped the New Zealand dollar rise as investors around the world look for opportunities to earn high yields. However, it also makes the New Zealand dollar particularly sensitive to changes in interest rates. When the U.S. starts raising rates and New Zealand holds rates steady or cuts them, the NZD's spread advantage shrinks. In this scenario, speculators will unwind their carry trade positions and the New Zealand dollar will come under pressure.
4. Interest rate difference. Professional New Zealand dollar traders pay close attention to the difference between New Zealand's cash rate and short-term rates in other industrial nations. These differences are a good indicator of underlying capital flows as they indicate how much a yield premium New Zealand's short-term fixed income assets offer over foreign short-term fixed income assets, and vice versa. Since investors always look for the highest yielding assets, interest rate differentials provide traders with an indication of potential volatility in currencies. This is especially important for carry traders, who enter and close positions based on positive interest rate differentials between fixed income assets around the world.
5. Immigration. As mentioned earlier, New Zealand has a small population, less than half the population of New York City. Therefore, an increase in immigration has a significant impact on the economy. In fact, growth in New Zealand's immigrant population has contributed considerably to economic performance. Due to the increase in population, the demand for household goods has increased, raising the overall consumption level.
6. The impact of drought. New Zealand's GDP is highly sensitive to adverse weather conditions as most of New Zealand's exports are commodities and adverse weather conditions can damage the country's agricultural activities. In 1998, drought losses exceeded $50 million. In addition, in Australia - New Zealand's largest trading partner, drought is also a frequent occurrence. Australia lost up to 1% of its GDP due to the drought, which also had a negative impact on New Zealand's economy.
Central Bank: Reserve Bank of New Zealand (RBNZ)
The Reserve Bank of New Zealand (The Reserve Bank of New Zealand), which has New Zealand's only legal right to issue banknotes (issuing New Zealand dollars, commonly known as New Zealand dollars), is the central bank of the New Zealand government, responsible for the implementation of New Zealand's currency and monetary policies, and maintaining the stability of the financial system. stable and effective. The bank was established as a private bank in 1934 and was nationalized by the New Zealand government in 1936. The Federal Reserve Bank of New Zealand is wholly owned by the New Zealand government and implements a chairman responsibility system. Relevant policy decisions are made by the chairman. The chairman is appointed by the Minister of Finance for a term of five years.
08
Australian Dollar (AUD) - Commodity Currency
The Australian dollar is the quintessential commodity currency. Iron ore, copper ore, and gold ore account for a large proportion of Australia's national production, especially gold.
Australian dollar features:
The Australian dollar is a favorite currency for carry traders as it has the highest yield among the seven currencies on the trading platform. Therefore, under the influence of deleveraging, the volatility of the Australian dollar is relatively large. Otherwise, it will only fluctuate by an average of 30-40 basis points per day like other major currencies.
Factors affecting the Australian dollar:
1. The dollar strengthens. The economic data released by the US dollar is good, indicating that the US economy has emerged from the crisis and has fully recovered. The United States will completely withdraw from QE3 this month. At the same time, interest rate hikes are expected to advance, and monetary policy will return to normal in advance, which will promote the strengthening of the US dollar exchange rate. A stronger U.S. dollar means that non-U.S. currencies generally depreciate against the U.S. dollar.
2. China factor. The weakening of the Chinese economy has led to a sharp reduction in the demand for bulk commodities. The reduced demand for bulk commodities has led to a continuous decline in commodity prices, which has dealt a major blow to the Australian economy, which is dominated by commodity exports, and also contributed to the weakening of the Australian dollar.
3. International commodity prices. The Australian dollar, also known as the "commodity currency", is closely tied to the prices of commodities such as gold, copper, nickel, coal and wool, which account for nearly two-thirds of Australia's total exports. Therefore, the trend of the Australian dollar is usually strongly affected by the price trend of these commodities. The Australian dollar often finds support in inflationary economic environments, a time when commodity prices are high. For example, when gold prices rose in 2002, the Australian dollar also rose, and when metal prices fell back in the summer of 2002, the Australian dollar also fell back, and both rose again in the fourth quarter of 2004.
4. The Reserve Bank of Australia. Under the Reserve Bank Act 1959, the RBA acquired the status of Australia's central bank. The main task of the Reserve Bank is to keep the Australian dollar stable and maintain full employment. In 1993, the Reserve Bank of Australia gained the power to operate independently. At the same time, the work target of the Reserve Bank was also determined, that is, to control the annual growth rate of inflation in the medium term at 2-3%. The reason for having a medium-term rather than a short-term inflation target is to encourage healthy and sustainable economic growth.
5. The Reserve Bank Committee. The Reserve Bank Board is responsible for setting monetary policy. The committee holds a monetary policy meeting on the first Tuesday of every month except January each year. The results of the interest rate decision are generally announced on the second day of the meeting. The committee is made up of nine members, including the Governor of the Reserve Bank, the Deputy Governor, the Secretary to the Treasury and six other external members appointed by the Chancellor. The term of office of the President and Vice President is up to 7 years, and they can be re-elected. The term of office of the 6 external members is up to 5 years.
8. Interest rate. The Reserve Bank's most important monetary policy tool is the overnight money market rate, or cash rate target. The cash rate is the overnight lending rate between two financial institutions.
Central Bank: Reserve Bank of Australia (RBA)
The Australian dollar interest rate is relatively high in the global market, and the long-term goal of the RBA is to maintain price stability and economic growth. The RBA Board is headed by the Chairman and consists of up to six members, in addition to a Deputy Chairman and a Treasurer. Members of the committee work together to achieve the 2%-3% inflation target, and the committee meets nine times a year.
Through the introduction of the article, I believe you have a certain understanding of the mainstream currencies in the foreign exchange market. With the continuous development of the current financial market and the growth of globalization, foreign exchange and exchange rates play an increasingly important role in daily affairs, and reasonable investment can be made with the help of foreign exchange.
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