There are several ways to classify foreign exchange.

Foreign exchange refers to all foreign currency assets owned by a country. There are many ways to classify foreign exchange. For investors, it is not necessary to know all the foreign exchange classification methods, as long as they know more about the main methods of foreign exchange classification.

(1) According to the degree of restriction, it generally includes three types, namely freely convertible foreign exchange, limited freely convertible foreign exchange and bookkeeping foreign exchange.

Freely convertible foreign exchange is the most used foreign exchange in international settlement, which can be bought and sold freely in the international financial market, can be used to pay off creditor's rights and debts in international finance, and can be freely converted into currencies of other countries.

Limited freely convertible foreign exchange refers to foreign exchange that cannot be freely converted into other currencies or paid to a third country without the approval of the issuing country. Therefore, foreign exchange is subject to exchange restrictions to a certain extent, and most currencies of various countries belong to limited freely convertible currencies, even RMB, which also belongs to this category.

Bookkeeping foreign exchange, also known as clearing foreign exchange or bilateral foreign exchange, cannot be converted into other currencies and cannot be paid to a third country.

(2) According to the classification of sources and uses, foreign exchange can be divided into three types, including trade foreign exchange, non-trade foreign exchange and financial foreign exchange.

Trade foreign exchange, also known as physical trade foreign exchange, refers to foreign exchange derived or used in import and export trade, and is also an international means of payment formed by international commodity circulation.

Non-trade foreign exchange refers to all foreign exchange except trade foreign exchange, that is, all foreign exchange that is not derived from or used for import and export trade, such as labor foreign exchange, remittance, donation, etc.

Financial foreign exchange is different from trade foreign exchange and non-trade foreign exchange. How to understand this type of foreign exchange? The so-called financial foreign exchange is the most typical example of foreign exchange traded between banks. This kind of financial foreign exchange does not come from tangible trade, intangible trade or tangible trade. Its function is to manage and manipulate various currency positions.