# Foreign exchange analysis basics Foreign forexcashbackprofitcalculator analys cashbackforexpipcalculator basics Exchange cashback forex profit calculator cashbackforexprofitcalculator interest rate is a means by which the economy between countries to carry out international trade through the exchange rate, cashback forex countries to carry out international trade; through the interest rate, to achieve the transfer of funds between two countries, direct and indirect investment can only happen international any economic and investment decisions are inseparable from the analysis of the exchange rate it goes without saying that foreign exchange analysis is essential to foreign exchange transactions The exchange rate is the relative price between the currencies of two countries and other prices, it is determined by the supply and demand in the foreign exchange market Foreign exchange is a financial asset, people hold it because it can bring the return on assets People in the choice is to hold the national currency, or hold a foreign currency, the first is to consider which currency can bring him a greater return, and The rate of return of each countrys currency is measured by the interest rate of its financial market In the foreign exchange market equilibrium, the return brought by holding any two currencies should be equal that Ri = Rj (interest rate parity conditions) formula, R represents the rate of return, i and j represents different countries If the return brought by holding two currencies are not equal, it will produce an arbitrage: buy A foreign exchange, and sell B foreign exchange this arbitrage, there is no Any risk thus once the returns of the two currencies are not equal, the existence of the hedge will drive the returns of the two currencies to be equal But here is a problem, these two returns Ri and Rj cannot be compared directly because they are expressed in different currencies To eliminate this problem, they can be converted to be expressed in the same currency Here assume two currencies: the dollar and the mark The return on the mark is expressed in dollars The equation is RDM-(EeCBDM-ECBDM/ECBDM) where RDM is the German interest rate, ECBDM is the exchange rate of the mark relative to the dollar (how many marks per unit of the dollar), EeCBDM is the expected value of the exchange rate of the mark relative to the dollar and the whole (EeCBDM-ECBDM/BECDM) represents the expected rate of depreciation of the mark relative to the dollar by this conversion formula, interest rate parity conditions can be expressed as follows: RC-RDM = (EesBDMAECBDM)/ECBDM, this formula in the conditions of interest rate parity, the foreign exchange market reached equilibrium at this time the exchange rate (equilibrium rate) is also determined