What is the basis of monetary value?

This article introduces the content of currency in foreign exchange knowledge. What is the basis of currency value? It must be admitted that whether a country's currency is ultimately strong - to maintain an upward trend, the essence is still that its labor force value ratio is higher than that of other countries. In the new economic era, the so-called labor force value ratio mainly refers to the difference in the growth trend of labor productivity, that is, the proportion of value created by innovative labor in GDP. At the same time, the strength of a country's resource reserves also has a great impact on the strength of the country's currency, especially in an era of increasing global resource shortages. This is also the fundamental reason why the currencies of some resource-exporting countries always rise. Currency to some extent reflects the strength of a country. If the country is united, the regime is stable, and labor productivity continues to rise, the country's currency can remain strong and strong; on the contrary, if a country is constantly fighting, often using force abroad, and the national financial resources are not used in the local area, the country's currency will have problems. In this sense, the dollar is a success or a failure. Although there is no possibility of collapse for a while, it must withdraw troops from Iraq if it is to become strong. Of course, the euro also has problems, and the pound also has problems. World politics are very uncertain, terrorist attacks, ethnic conflicts, local wars and so on. Generally speaking, there are some famous safe-haven currencies in the world, such as the Swiss franc and the Japanese yen, while the US dollar has a particularly strong absorptive capacity, and the possibility of war in the United States is very small. Therefore, the US dollar often becomes the best risk currency when major risk events occur around the world. For example, when there is a global financial crisis, the US dollar will inevitably rise sharply.

Another important reason for the strength of a currency is the choice of foreign exchange reserves around the world. Recently, the hype about countries reducing their dollar reserves is one of the root causes of the dollar's sharp decline. However, since US capital markets such as bonds and stocks remain the most efficient market in the world, and the dollar still accounts for as much as 70% of global trade transactions, it is impossible for central banks to significantly reduce dollar reserves. Reducing dollar reserves may not be the best option when possible. A currency to replace the dollar as the world's reserve currency has not yet emerged.

Of course, due to the different monetary policies of different countries, it will also be reflected in the fluctuation of foreign exchange prices. For example, whether the US government really implements the so-called "strong dollar" policy. Whether the monetary, labor and fiscal policies of the 12 countries in the euro zone can be unified. For example, when will Japan's low interest rate policy end. Also, whether the ultra-loose financial conditions in the UK will go wrong, etc. These information must be paid attention to by foreign exchange speculators. They not only reflect the characteristics of a currency, but also may lead toforeign exchange marketThe reason why the actual price deviates too much from the equilibrium price.