Preface
4 types of foreign exchange currencies!
Did you know that they have different characteristics?
The foreign exchange market is the largest investment market in the world, and various currencies have their own characteristics. If a novice wants to enter the foreign exchange market, they must understand the characteristics of foreign exchange first. The more common foreign exchange currency behaviors are the following four categories:
Policy Type
The world’s leading countries such as the United States, Britain, etc., their national policies are often concerned by the market, so their currencies are naturally greatly affected by national policies. Take the US dollar and the euro as an example, because the exchange rate trend is highly related to its monetary policy and economic conditions, so when investing in this currency, you should pay close attention to the interest rate policies of the central banks of various countries. When the central bank’s interest rate policy turns tight, the exchange rate of these currencies has a good chance to rise; conversely, when the central bank adopts an accommodative interest rate policy, the exchange rate usually falls.
For example: USD, EUR, GBP
Hedging Type
Hedging currencies refer to those currencies that are less susceptible to politics, wars and market fluctuations, the most representative of which are the Japanese yen and the Swiss franc. The more foreign exchange stock a country has, the higher the trade surplus, the political stability, the low debt ratio, and the low interest rates, the more chance the country’s currency has to become a hedging currency. Taking the Japanese yen as an example, Japan has been in a low interest rate environment for a long time, so investors from all over the world often borrow the Japanese yen and then convert it into other currencies to invest to earn the difference. Switzerland is considered to be the safest place in the world, because it is a permanent neutral country in the world and has long adopted protective financial and foreign exchange policies. When market uncertainty increases, the Swiss franc becomes the first choice for investors to transfer funds.
For example: Japanese yen, Swiss franc
Commodity Type
Commodity currencies refer to the currencies of those countries that mainly produce and export bulk commodities such as energy commodities, basic raw materials and agricultural products. Therefore, currency characteristics are usually linked to fluctuations in raw materials, so they are also considered to be risky. Take Australia as an example: Australia is the largest exporter of iron ore, so when the price of iron ore falls, the Australian dollar also tends to depreciate. Take the Canadian dollar as an example: Canada is one of the seven major industrial countries and exports oil, so oil prices have an important impact on the Canadian dollar exchange rate.
For example: Canadian dollars, Australian dollars, rubles
Emerging Market Type
The so-called emerging markets refer to some countries with open financial market investment and relatively lower per capita income than developed markets. The largest emerging market countries include Brazil, the Soviet Union, India and China, collectively known as the “BRIC” (BRIC). Exchange rates of emerging market currencies may be subject to local government restrictions. One common example is China’s RMB. Investors need to pay attention to the attitude of the Chinese government on the exchange rate. If the government wants to protect the domestic export industry, it will usually prevent the RMB exchange rate from rising and maintain the competitiveness of the export industry.
For example: RMB
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