Why can the exchange rate be stabilized with foreign exchange reserves?

Because the exchange rate falls, the RMB people appreciate, that is to say, the US dollar is relatively depreciated, so to curb the appreciation of the RMB currency is to prevent the US dollar from depreciating! Let the dollar and the yuan appreciate as much as it does!

So in this case, it is enough to reduce the number of dollars in circulation, because the less money in circulation, the more valuable the money, just like in China in the eighties!

So at this point, you can store a lot of dollars and keep them out of circulation, which of course requires a very large amount to achieve that effect. But at present, China's foreign exchange reserves are more than 1 trillion yuan, and this is all in the form of dollars!

Therefore, as long as the United States provokes us one day, as long as we take all this money to the international market and spend it, the dollar will depreciate sharply, and the US economy will be doomed!

That's where they watch out for China!

A certain amount of foreign exchange reserves is an important means for a country to carry out economic adjustment and achieve internal and external balance. When there is a deficit in the balance of payments, the use of foreign exchange reserves can promote the balance of payments; When there is an imbalance in the domestic macroeconomy and the aggregate demand is greater than the aggregate supply, foreign exchange can be used to organize imports, so as to adjust the relationship between the aggregate supply and the aggregate demand and promote the macroeconomic balance. At the same time, when the exchange rate fluctuates, foreign exchange reserves can be used to intervene in the exchange rate to stabilize it.

Therefore, foreign exchange reserves are an indispensable means of achieving economic equilibrium and stability, especially when economic globalization continues to develop and one country's economy is more vulnerable to the economic influence of other countries.

Our country's foreign exchange reserves are mainly US dollars, while China's exchange rate is mainly in ratio to US dollars, so there is a certain balance between the two, you can think for yourself.

Foreign exchange reserves include foreign currency, foreign investments, government bonds**, etc. The more foreign exchange reserves, the stronger the control. For example, if the country does not buy US Treasury bonds, then its ** capital will be less. Once all investments abroad are withdrawn, then it will affect the local economy.

An exchange rate is the ** of one currency or the ratio of one currency to another. The reason why a country needs a foreign currency is that both currencies have purchasing power in the issuing country. Therefore, the essence of the exchange rate is the ratio of the purchasing power of the two currencies.

The exchange rate sounds fantastic, but like all markets, it starts with ** and sell. Due to the division of economic regions, the currencies of countries in the world are also different, but this division does not completely block the flow of goods and people, so the demand for currency transactions also arises with the flow of goods and people.

An exchange rate is the currency of one country expressed in the currency of another country**. It is made in the forex market by buyers and sellers. People who care about the renminbi exchange rate don't necessarily understand the logic behind it, but they often see words like foreign exchange reserves, current account, capital and financial account, foreign direct investment, etc.

The exchange rate is a kind of exchange, and the main role of the exchange rate is resource allocation. If the RMB exchange rate is too high, then many enterprises that rely on low exchange rates for exports will have no way to operate and can only turn to domestic sales, which is not good for exports. Foreign investors also do not like the high exchange rate of the renminbi, which will significantly reduce the inflow of foreign direct investment into China.

In short, China simply cannot accumulate that much foreign exchange reserves due to its high exchange rate.

The reason for the difference in the level of exchange rates is affected by the balance of payments. To put it simply, the so-called balance of payments is the import and export of goods and services, and the import and export of capital. In the balance of payments, if exports exceed imports and capital flows into the country, the demand for money in the international market increases, and the local currency rises.

Conversely, if imports are greater than exports, capital flows out, the demand for the country's currency in the international market decreases, and the local currency depreciates. Under the paper money system, the exchange rate is fundamentally determined by the real value represented by the currency. According to the purchasing power evaluation, the purchasing power parity of a currency refers to the exchange rate of a currency.

A country's high price level and high inflation rate indicate a decrease in the purchasing power of the local currency, which will contribute to the depreciation of the local currency. Otherwise, it tends to appreciate in value.

Some scholars believe that the impact of interest rates on exchange rates is mainly achieved through the impact of arbitrage capital flows. Moderate inflation and higher interest rates attract foreign capital inflows, dampen domestic demand, reduce imports, and increase the value of the local currency. In the case of severe inflation, the interest rate is always negatively correlated with the exchange rate.

This factor of people's psychological expectation is particularly prominent in the current international financial market. Exchange rate psychology believes that the exchange rate is the concentrated embodiment of the subjective psychological evaluation of currency by both the supply and demand sides of foreign exchange. High evaluation, strong confidence, currency appreciation.

Chinese theories play a crucial role in explaining numerous short-term or very short-term exchange rate fluctuations. In addition, factors influencing exchange rate fluctuations include monetary and exchange rate policies, the impact of unexpected events, the impact of international speculation, the release of economic data, and even the impact of market openings and closings.

<> foreign exchange reserves refer to the foreign currency held by enterprises, enterprises or individuals, which is an important financial resource and plays an important role in the international market.

The main functions of foreign exchange reserves are:

1) Maintain national financial stability. Foreign exchange reserves can help stabilize the country's fiscal revenue and expenditure, avoid national fiscal imbalances, and maintain the country's economic stability.

2) Maintain the country's international payment capacity. Foreign exchange reserves can help maintain the country's international payment capacity, ensure that the country can fulfill its international debts on time, and avoid payment difficulties in the country's finances, so as to maintain the country's international reputation.

3) Maintain the value of the national currency. Foreign exchange reserves can help to maintain the value of the national currency, stabilize the exchange rate of the national currency, and avoid fluctuations in the exchange rate of the national currency, thereby maintaining the value of the national currency.

4) Maintain the stability of the country's foreign exchange market. Foreign exchange reserves can help maintain the stability of the country's foreign exchange market, stabilize the country's foreign exchange liquidity, avoid fluctuations in the country's foreign exchange market, and maintain the stability of the country's foreign exchange market.

5) Improve the structure of the country's economy. Foreign exchange reserves can help improve the country's economic structure, invest in foreign high-tech projects, introduce foreign advanced technology, and improve the level of national economic development, thereby improving the country's economic structure.

6) Promote international development. Foreign exchange reserves can help promote international development, support the country's international development, stabilize the country's balance of payments, and thus promote international development.

As can be seen from the above, foreign exchange reserves play an important role in maintaining the country's financial stability, maintaining the country's international payment capacity, maintaining the value of the country's currency, maintaining the stability of the country's foreign exchange market, improving the country's economic structure, and promoting international development.

Therefore, the role of foreign exchange reserves is very important, and all countries should strengthen the management of foreign exchange reserves, make rational use of foreign exchange reserves, and provide strong support for economic and social development. At the same time, it is necessary to establish and improve the management system of foreign exchange reserves, strengthen the management of foreign exchange reserves, and ensure the safety and effectiveness of foreign exchange reserves to ensure the smooth progress of the country's economic and social development.

Foreign exchange attempted to intervene, such as the US dollar, to reduce the exchange rate of the local currency against that foreign exchange. The essence of this method is to change the supply and demand of the local currency in the market by providing more local currency to the market, and then increase the exchange rate of a certain foreign exchange against the local currency.

a.The purpose of such operations is usually to protect against the impact of some kind of foreign exchange depreciation on the country's exports. Japan, and now China, often do this under the current conditions of excessive dollar issuance by the United States.

b.Although this kind of operation can protect the country's exports under certain conditions, the negative effect is that it is forced to inject a large amount of local currency liquidity into the market, which can easily lead to inflation in the country. And the large amount of foreign exchange reserves acquired as a result of this operation is also at risk of depreciation.

c.This may not always work. For example, the Bank of Japan often does this, but the effect of reducing the appreciation of the yen is not obvious.

The superficial reason is that there is a large stock of local currency in the market, and the amount of local currency injected into the market is not enough to resist the total amount of foreign exchange speculators borrowing yen for speculation. China has been able to control the extent to which the renminbi appreciates, in large part because of the limited number of renminbi leaving its borders. Although theoretically, the central bank can inject local currency into the market indefinitely, given the above-mentioned risks of inflation and foreign exchange depreciation, foreign currency operations will not continue indefinitely.

Therefore, it is a gamble between a country's central bank and international foreign exchange speculators. The two sides have different chips and risks, and have different expectations of future exchange rate movements, resulting in great uncertainty about the final outcome of such operations.

2.Sell a certain foreign exchange, increase the exchange rate of the local currency against the foreign exchange, prevent the local currency from depreciating sharply, and the reverse operation of the above-mentioned ** foreign exchange.

The details are as follows: 1. Foreign exchange.

1) It is a payment voucher used for international settlement in a foreign currency. The International Monetary Organization's interpretation of foreign exchange is: foreign exchange is the creditor's rights that can be used in the event of a deficit in the balance of payments held by monetary administrative authorities (**banks, monetary institutions, foreign exchange leveling** and the Ministry of Finance) in the form of bank deposits, treasury bills of the Ministry of Finance, long-term and short-term bonds.

2) Including: foreign currency, foreign currency deposits, foreign currency valuable** (**public bonds, treasury bills, corporate bonds, **, etc.), foreign currency payment vouchers (bills, bank deposit certificates, postal savings certificates, etc.).

2. Foreign exchange reserve

1) Also known as the foreign exchange reserve, it refers to the foreign exchange part of the international reserve assets held by a country**, that is, the creditor's rights expressed in foreign currency held by a country**. An asset held by a country's monetary authority and can be exchanged for foreign currency at any time. In a narrow sense, foreign exchange reserves are an important part of a country's economic strength, and are the accumulation of foreign exchange used by a country to balance the balance of payments, stabilize the exchange rate, and repay external debts.

Broadly speaking, foreign exchange reserves refer to assets denominated in foreign currency.

2) Including cash, foreign bank deposits, foreign valuable**, etc. Foreign exchange reserves are an important part of a country's international solvency, and at the same time, they have an important impact on the balance of payments and the stability of the exchange rate.

3. The foreign exchange held by the ** banks and other ** institutions of various countries is the foreign exchange reserves. Together with reserves, special drawing rights and readily available funds in the International Monetary Organization, they constitute the total official reserves (reserve assets) of a country.