Foreign exchange reserves are how to intervene in the foreign exchange market and stabilize the exch

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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 TUSD in the digital currency also has a stabilizing effect.

Foreign exchange reserves, which means a country's reserves, are mainly foreign currency assets held by **, which are used as investments and for financial transactions when necessary to support the local currency exchange rate. Each country will theoretically maintain a certain amount of foreign exchange reserves, as for the amount of foreign exchange reserves, it depends on its national economic factors, such as the scale and speed of national economic development, the degree of economic openness, the development of foreign countries, the ability to use foreign capital and international financing, and the country's macroeconomic regulation and control capabilities. When the foreign exchange market is in a state of oversupply, the mainland will release renminbi to absorb the excess foreign exchange in the market**, and the foreign exchange absorbed will be allocated to the foreign exchange reserves, so the mainland's foreign exchange reserves have continued to increase over the years, and the total foreign exchange reserves of the mainland now rank first in the world.

Holding a large amount of foreign exchange reserves has both advantages and disadvantages for countries, because each country has different economic factors, so there is no absolute standard. To judge whether a country's foreign exchange reserves are surplus or insufficient, the first condition is to understand the country's economic factors and its development direction. **Regulating and stabilizing the exchange rate In summary, the mainland holds a large amount of foreign exchange reserves, and its role can be summarized into four aspects.

First, a large amount of foreign exchange reserves can stabilize the currency exchange rate, keep the value of the renminbi stable, and when the currency depreciates, foreign exchange reserves can be used to support the currency; Second, a certain degree of foreign exchange reserves can improve the country's credit rating and attract international capital inflows, because the country has sufficient foreign exchange reserves as a backing, and the investment risk is relatively reduced, which can give investors confidence and attract foreign investment; Third, the reduction of financial and economic risks means that the financial and economic system is relatively stable. Fourth, foreign exchange reserves can be used as investment income, so that foreign exchange can increase in value, although this is not the original intention of holding foreign exchange, but it is an income.

Of course, foreign exchange reserves have a relationship with the exchange rate, for example, the exchange rate of the RMB dollar Look at the elementary school math rmb US dollar = exchange rate The exchange rate is increased There are 3 in 3 possible 1. The US dollar was unchanged and the RMB rose by 2. The RMB remains unchanged, the US dollar decreases, rises and the US dollar decreases, and at the same time, the foreign exchange reserves are the above US dollars, on the contrary, the exchange rate of the US dollar and the RMB can be doubled, and if the foreign exchange reserves are sufficient, is the exchange rate stable?

There shouldn't be a certain logical relationship to this, I don't know

There is an indirect relationship between foreign exchange reserves and exchange rates:

1.The appreciation of the local currency (the decrease in the exchange rate under the direct price) reduces the cost of imports, which promotes imports, and on the contrary, the amount of foreign currency exchanged for exports decreases, and the export profits fall, which inhibits exports, so that the amount of rubber exchange reserves decreases. A depreciation of the local currency will increase foreign exchange reserves.

2.One of the functions of foreign exchange reserves is to maintain the stability of the exchange rate, and the large amount of foreign exchange reserves indicates that the central bank has a strong ability to intervene in the exchange rate.

Foreign exchange reserves are the amount of money that a country has in an international currency (US dollar, Japanese yen, euro, etc.). It is usually used to purchase foreign goods or to conduct cross-border transactions.

The relationship between foreign exchange reserves and the exchange rate in Thailand's economic crisis refers to the fact that Thailand uses foreign exchange reserves to buy Thai baht, thereby changing the supply and demand of the Thai baht currency and thus affecting the exchange rate. However, this situation is only applicable to markets with a high degree of international circulation or where foreign investors can freely buy and sell a country's currency. Low openness to currency markets, such as China.

There will be no such situation.

Therefore, foreign exchange reserves should be said to have no direct relationship with the exchange rate!

The main purpose of foreign exchange reserves is to pay off the balance of payments deficit and to intervene in the foreign exchange market to maintain the exchange rate of the country's currency.

Foreign exchange reserve refers to the foreign exchange assets held by ** banks and other ** institutions in various countries in order to meet the needs of international payments. The specific forms of foreign exchange reserves are: short-term deposits abroad or other means of payment that can be cashed abroad, such as foreign currency**, checks, promissory notes, foreign currency drafts, etc.

The exchange rate, also known as the exchange rate, is the exchange rate between two currencies in the international currency exchange market. In the foreign exchange market, the buying and selling of national currencies is closely influenced by supply and demand, just like in the commodity market.

When people invest in the expectation that a certain currency is strong, the currency will appreciate, and the foreign exchange market will generate a greater demand for the currency, and traders will sell their own currency and exchange it for the currency. In this way, in the foreign exchange market, the amount of the currency is insufficient, the supply exceeds demand, the currency (exchange rate) will rise, the exchange rate of the national currency will be **, and the national currency will depreciate. At this time, the country sells off the currency assets in its foreign exchange reserves and replenishes them to the foreign exchange market, which can alleviate the shortage of the currency, support the exchange rate of the local currency, and keep the value of the local currency relatively stable.

1. Changes in the exchange rate of the reserve currency affect the real value of a country's foreign exchange reserves. An increase in the exchange rate of a reserve currency will increase the real value of the reserve currency, while a decrease in the exchange rate of the reserve currency will decrease the real value of the currency. Foreign exchange reserves are actually a reserve of international purchasing power.

2. Exchange rate changes affect the status and role of some international reserve currencies. A country's choice of reserve currency is always premised on the long-term stability of the reserve currency exchange rate. If the balance of payments of the issuing country of a certain reserve currency deteriorates for a long time, the currency continues to depreciate, and the exchange rate continues to **, the status and role of the reserve currency will continue to weaken, and even lose its status as a reserve currency.

The impact of supply and demand, the increase or decrease of a country's foreign exchange reserves, directly affects the supply and demand of currency.

The functions of foreign exchange reserves mainly include the following four aspects:

First, adjust the balance of payments and ensure external payments;

second, to intervene in the foreign exchange market and stabilize the exchange rate of the local currency;

Third, maintain international credibility and improve financing capacity;

Fourth, it is necessary to enhance comprehensive national strength and resist financial risks.

Foreign exchange reserve. 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.

Generally speaking, the increase of foreign exchange reserves can not only enhance the ability of macroeconomic regulation and control, but also help to maintain the credibility of the country and enterprises in the world, help to expand the international market, attract foreign investment, reduce the financing cost of domestic enterprises, and prevent and resolve international financial risks. The appropriate level of foreign exchange reserves depends on a variety of factors, such as the status of imports and exports, the size of external debt, and the actual utilization of foreign capital. Foreign exchange reserves should be kept at an appropriate level based on the benefits of holding them, the comparison of costs and the situation in these areas.

The intervention of the monetary authorities in the foreign exchange market is effective in two ways.

The asset-adjusted effect of the intervention. The asset adjustment effect refers to the change in the quantity and composition of various assets in the foreign exchange market and related transactions, thereby affecting the exchange rate determined in the asset market. Generally speaking, allowing prudent non-sterilizing intervention to regulate the exchange rate is effective, but it will cause changes in the amount of the national currency, which will affect the domestic objectives of economic policy in the pursuit of external equilibrium; Sterilization interventions may be ineffective, but they will not affect the domestic objectives of economic policy.

Signaling effects of the intervention. The signal effect refers to the signal to the market through the intervention itself, so as to achieve the purpose of achieving the corresponding adjustment of the exchange rate. The signaling effect of intervention is generally particularly effective when market expectations are chaotic and speculative factors are rampant.