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Forex and characteristics

The types of foreign exchange introduced here mainly include the currencies that Hong Kong investors are exposed to, and are relatively highly circulated currencies in the world that are often used as means of payment for international trade, such as the US dollar, the Euro, the British pound, the Japanese yen, and the Australian dollar.        



The US dollar is the main reserve currency of most countries in the world, and its currency circulation is large, while the fluctuations of other currencies mainly revolve around the relative exchange rate fluctuations with the US dollar. The right to issue US dollars belongs to the US Treasury.


There are four main characteristics of the US dollar: (1) 90% of foreign exchange transactions involve the US dollar. In the foreign exchange market, the most frequently traded and most liquid currency pairs are EUR/USD, USD/JPY, GBP/USD, and USD/CHF, all of which involve the US dollar. In fact, 90% of foreign exchange transactions are related to the US dollar . Therefore, foreign exchange investment traders are very concerned about the dollar's every move.

(2) The US dollar is the most important foreign exchange reserve. In recent years, the proportion of the US dollar in global foreign exchange reserves has decreased, but it is still the most important foreign exchange reserve.    

(3) The dollar and gold are generally negatively correlated. When the dollar rises, gold falls; when the dollar falls, gold rises. However, as the proportion of the US economy in the world economy began to decline, the influence of the dollar gradually declined, the negative correlation between the dollar and gold began to weaken, and even within a certain period of time, there was a positive correlation between the rise and fall. In short, an important factor that determines the correlation between the dollar and gold is the status of the dollar in the world's monetary system.

(4) The currencies of other countries are linked to the US dollar. Linking the US dollar to currencies of other countries means that in order to maintain the US dollar as a reserve currency, the government of a country agrees to buy or sell any amount of domestic currency at the linked exchange rate. If the currencies of other countries are decoupled from the US dollar, such as the diversification of reserves or increased exchange rate flexibility, it means that the demand for US dollars and US dollar assets is reduced. In the long run, it has a very negative impact on the US dollar.

The influencing factors of the US dollar mainly include the following aspects: (1) The influence of the US Federal Reserve Bank (Federal Reserve Bank). (2) The influence of the Federal Open Market Committee (FOMC). (3) Interest rates. The interest rate is the Federal Funds Rate (Fed Funds Rate), which is the most important interest rate indicator and the overnight loan interest rate for mutual loans between the reserve institutions. (4) Discount rate. (5) 30-year Treasury Bond. (6) 3-month Eurodollar deposits. (7) 10-year Treasury Note (10-year Treasury Note). (8) The influence of the Ministry of Finance (Treasury). (9) The impact of economic data. (10) Stock market. (11) The effect of cross rate (Cross Rate Effect). (12) Fed Funds Rate Futures Contract. (13) 3-month Eurodollar Futures Contract.   Back to top


The Euro is a currency issued by the European Central Bank and used by members of the European Monetary Union. The euro accounts for 57.6% of the US dollar index, with the largest weight (the US dollar index is an indicator that comprehensively reflects the exchange rate of the US dollar in the foreign exchange market). Therefore, the euro can basically be regarded as the currency of the US dollar. Investors can refer to the euro to judge Dollar strength.

There are three main characteristics of the euro: (1) The euro/dollar is the most liquid currency pair, and its volatility is regarded as a measure of the overall health of the European economy and the US economy.

(2) The euro has unique risks. Unlike the currencies of other countries, the euro is the common currency of 17 member countries. Therefore, the trend of the euro will not only be affected by the political or economic fluctuations of any of the 17 countries, but also by the mutual relations between the 17 countries. This undoubtedly greatly increased the difficulty of maintaining the stability of the euro, especially when an adverse situation arises.

(3) The euro is an important foreign exchange reserve. As the euro's influence in the world continues to increase, the euro has become the second largest global foreign exchange reserve.

The influencing factors of the euro mainly include the following aspects: (1) The influence of The Eurozone. (2) The influence of the European Central Bank (ECB). (3) Interest rates. (4) 3-month Euro deposit. (5) 10-year Government Bonds. (6) The impact of Economic Data. (7) The effect of cross rate (Cross Rate Effect). (8) 3-month Euro Futures Contract. (9) Political factors.    Back to top


The British pound is the official currency of the United Kingdom. In daily transactions, the British pound is more popular with everyone. The trading of the pound is more active, the transaction volume is larger, and the daily fluctuations are also larger. After the euro was adopted, the pound has become a long-established currency that is still in use. It currently accounts for the third place in global foreign exchange reserves, after the dollar and the euro. Pound sterling is the fourth largest foreign exchange currency, after the US dollar, the euro and the yen. Although there is no fixed exchange rate between the British and the euro, there is often a long-term synchronized trend between the pound and the euro.

The main characteristics of the pound have three points: (1) GBP/USD has good liquidity, because the UK has a highly developed capital market.

(2) Sterling has a positive correlation with energy prices. Since energy production accounts for 10% of the UK's GDP, sterling is usually correlated with energy prices. For example, EU member states need to import oil from the UK, so when oil prices rise, they will have to buy more pounds to pay for energy purchase contracts. In addition, higher oil prices also benefit UK energy exporters.

(3) The relationship between the pound and the euro. Although the United Kingdom is a member of the European Union, it has not yet joined the euro area, so it is still using the pound. Whether to join the euro zone in the future is still unknown. Therefore, any speech, comment or opinion poll on the euro by British politicians will affect the foreign exchange market. If there are signs of joining the euro zone, the pound is often under downward pressure.

The influencing factors of sterling mainly include the following aspects: (1) The influence of Bank of England (BOE). (2) The influence of the Monetary Policy Committee (MPC). (3) Interest rates. (4) Phnom Penh bonds (Gilts). (5) 3-month Eurosterling Deposits. (6) The influence of the Ministry of Finance (Treasury). (7) The relationship between the British Pound and the European Economic and Monetary Union. (8) The impact of Economic Data. (9) 3 month European pound deposit futures. (10) Financial Times 100 Index (FTSE-100). (11) The effect of cross rate (Cross Rate Effect).   Back to top


The yen is the most active currency in foreign exchange transactions, one of the most volatile currencies in the foreign exchange market, and one of the most active currencies. Japan is a resourceless country. Its trade and industry are developed, and overseas investment is large. At the same time, the Japanese government implements a protection policy on exchange rates and often intervenes in foreign exchange markets. Therefore, exchange rate fluctuations are relatively large. Japan is one of the countries with the fastest economic development after the Second World War, and the Japanese yen is also one of the fastest appreciation currencies after the war, so the status of the Japanese yen in foreign exchange transactions has become increasingly important.

The main characteristics of the yen are five points: (1) The Bank of Japan intervenes in the foreign exchange market. Past history shows that when the Bank of Japan and the Ministry of Tibet are dissatisfied with the yen exchange rate, they will actively intervene in the foreign exchange market.

(2) Sensitive period of yen fluctuations. Before the end of the Japanese fiscal year (March 31), Japanese exporters repatriated their foreign assets for annual settlement, which resulted in a large increase in the demand for the yen, which led to the appreciation of the yen and currency pairs related to the yen were extremely active . After the end of Japan’s fiscal year, Japanese yen demand returned to normal, investors closed positions and left the market, often triggering a wave of yen declines.

(3) High attention to bank accounts. Because the previous Japanese economic crisis stemmed from the Bank of Japan's non-performing loans, foreign exchange traders paid more attention to the Bank of Japan's accounts. Therefore, once the Bank of Japan has operational problems, it is easy to cause fluctuations in the foreign exchange market.

(4) Spread trading. For a long time, the yen has been the currency with the lowest interest rate among developed countries, making it the currency of choice for selling or borrowing in spread trades.

(5) Debt problem. Japan's debt level is very high, ranking first among developed countries. Once the internal risks contained therein are released, the consequences may be serious.

The influencing factors of the yen mainly include the following aspects: (1) The influence of the Japanese Ministry of Finance. (2) The influence of the Bank of Japan (BOJ). (3) Interest rates. (4) Japan Government Bonds (JGBs). (5) The influence of the Economic and Fiscal Policy Agency. (6) The influence of the Ministry of International Trade and Industry (MITI). (7) The impact of Economic Data. (8) The Nikkei 255 index (Nikkei-225). (9) The effect of cross rate (Cross Rate Effect).   Back to top


The Swiss franc is the official currency of Switzerland and a currency with a relatively active trading. Because Switzerland pursues a neutral and non-aligned policy, Switzerland is considered to be the safest place. The Swiss franc is also known as a traditional safe-haven currency. In addition, because it is also a European currency, it usually basically follows the trend of the euro.

The main characteristics of the Swiss franc are three points: (1) the safe haven currency, the stability of the Swiss domestic economy, the continued surplus of international income support, the continuous growth of gold foreign exchange reserves, and the Swiss government’s protection policies on finance and foreign exchange, which make the Swiss franc’s credibility constant Upgrade to become a prestigious safe haven currency.

(2) The Swiss franc is positively related to gold and the euro. Both the Swiss franc and gold are important safe havens, and the Swiss gold reserves account for about 40% of foreign exchange reserves. Therefore, the Swiss franc and gold have a certain positive correlation. In addition, the economic relationship between Switzerland and Europe is very close, so the Swiss franc and the euro also show a certain positive correlation.

(3) Spread trading, similar to the yen, the Swiss franc is also a very low-interest-rate currency, and is therefore sought after by spread traders.

The influencing factors of Swiss franc mainly include the following aspects: (1) The influence of Swiss National Bank (SNB). (2) Interest rates (Interest Rates). (3) 3-month Euroswissfranc Deposits. (4) The impact of economic data. (5) The effect of cross rate (Cross Rate Effect). (6) 3-month European Swiss Franc deposit futures contract.   Back to top


The Australian dollar is a secondary currency in foreign exchange transactions. Although Australia is not an important producer and exporter of gold, the positive correlation between Australian dollar and gold prices is more obvious. In addition, the Australian dollar is a high-interest currency.

There are three main characteristics of the Australian dollar: (1) Commodity currency. Australia is an important resource producer and exporter in the world. Then, the trend of the Australian dollar must be affected by the trend of mineral resource prices, so it is called a commodity currency. (2) With a high degree of trade dependence, the economic conditions of its major trading partners will directly affect Australia's economic development. (3) Spread trading, in developed countries, Australia is one of the countries with the highest interest rates, and the Australian dollar has good liquidity, so it has become the main target of spread trading.

The factors affecting the Australian dollar mainly include the following: (1) The impact of the Reserve Bank of Australia. (2) The influence of the Reserve Bank Committee. (3) Interest rate. (4) The influence of the Chancellor of the Exchequer. (5) Connection with commodity prices. (6) Australia has a close relationship with the Japanese economy and the Eurozone economy.    Back to top


The Canadian dollar is similar to the Australian dollar and is a commodity currency. Canada is the most export-dependent country in the seven western countries. Unlike the Australian dollar, the Canadian dollar involves mostly non-energy commodities. Canada’s exports account for about 40% of GDP, 80% of its exports are destined for the United States, and its exports are mainly agricultural and marine products. The Canadian dollar is a typical dollar group currency and has a high degree of dependence on the US economy. The economic ties between the United States and Canada are very close. Under the current globalization background, cross-border mergers and acquisitions are very common. These mergers and acquisitions have led to capital flows between the two countries, which ultimately will affect currency fluctuations.

The influencing factors of the Canadian dollar mainly include the following aspects: (1) The influence of the Bank of Canada. (2) Monetary policy. (3) Interest rate. (4) The impact of cross exchange rates. (5) The impact of Economic Data. (6) Corporate merger and acquisition activities. (7) Canada Government Bonds (CGBs).   Back to top


The New Zealand Dollar is referred to as the New Zealand Dollar, and is the legal currency of New Zealand. Over the past two decades, New Zealand has successfully transformed from an agriculture-based economy to an industrialized country with international competitiveness. The livestock industry in New Zealand has wool, lamb and dairy products, and the export of crude wool is the largest in the world. New Zealand is the world's largest producer and exporter of velvet antler. It is also rich in fishery products. The 200-mile exclusive economic zone in the region ranks fourth in the world. New Zealand's standard of living is very high, and it has been under high inflationary pressure for a long time, so both the New Zealand dollar and the Australian dollar are currencies with high interest rates.

The influencing factors of NZD mainly include the following aspects: (1) The influence of Reserve Bank of New Zealand. (2) Interest rates (Interest Rates). (3) Relevant to the Australian dollar. (4) Currency associated with commodities. (5) The effect of arbitrage trading. (6) Climate effect. (7) The impact of Economic Data. (8) The impact of resettlement.    Back to top 


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