Exchange rate changes have a direct regulatory effect on a country's import and export trade. Under certain conditions, the devaluation of the local currency, that is, lowering the exchange rate, will promote exports and restrict imports; On the other hand, the appreciation of the local currency, that is, the rise of the exchange rate, plays a role in restricting exports and increasing imports.

Price: From the perspective of imported consumer goods and raw materials, the decline of exchange rate will cause the domestic price of imported goods to rise. As for the impact on the overall price index, it depends on the proportion of imported goods and raw materials in the gross national product. On the other hand, other things being equal, the price of imported goods may fall, and its influence on the overall price index depends on the proportion of imported goods and raw materials in the gross national product.

Capital flow: Short-term capital flow is often greatly influenced by exchange rate. When the local currency depreciates, domestic investors and foreign investors are unwilling to hold various financial assets denominated in local currency, and will convert them into foreign exchange, leading to capital outflow. At the same time, due to the continuous exchange of foreign exchange, the demand for foreign exchange is in short supply, which will push the local currency exchange rate further down. On the other hand, when there is a trend of appreciation of local currency abroad, domestic investors and foreign investors try to hold various financial assets denominated in local currency, which will lead to capital inflows. At the same time, since foreign exchange has been converted into local currency, the oversupply of foreign exchange will further promote the exchange rate of local currency.

Response time: 2021-01-14. Please refer to the latest business changes announced by Ping An Bank in official website.

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