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Foreign Exchange Market
GROUP 10:
ĐINH THI HUONG
LE THI TRANG
NGO THI THUY
TRAN THI HUONG GIANG
DO THI THANH THAO
What is the FX market?
Exchange rate
Role of the state bank in FX
What is the Forex Market?
The Forex Market is a net work of buyers and sellers operating without a centralized exchange where one currency is transferred for another currency between participants at agreed upon prices.
Forex is stand for Foreign Exchange phrase
Foreign exchange market (Forex) is market currencies between banks was established in
1971 when floating exchange rate are specified
What is the Forex
Market?
Traders include: banks, central banks, institutional investors,
currency speculators, corporations, governments,
retail investors,..
Largest and most liquid financial market in the world.
This is $ 1 Trillion
The daily volume of FX market is $ 5
Trillion
What is the Forex Market?
Forex does not have a financial center or any
transaction. The foreign exchange market is the market "interbank", and
based on electronic transactions between
systems linked together banks
operates 24 hours a day
What is the Forex Market?
Currencies are bought and sold in units called lots
1 lot = 100,000 units of the base currency
1 lot of EUR/USD =
€1 (1 Euro) X
100,000
Standard symbols for most commonly traded currencies:
EUR – EuroUSD – United States dollarCAD – Canadian dollarGBP – British poundHKD – Hong Kong dollar
JPY – Japanese yenAUD – Australian dollarCHF – Swiss francNZD – New Zealand dollarSEK – Swedish krona
Currencies are traded in pairs
GBP/USD or USD/JYP
A rate of exchange is the price of one currency in terms of another; rates are quoted in two ways:
1. A variable number of units of foreign currency to a fixed number of units of home currency: e.g. euro 1.4640 = £1; or Hong Kong dollars 14.14.4531= £1. This type of rate quotation is termed an “indirect rate”.
2. A number of units of home currency to one unit of overseas currency: e.g. quotations in euros are quoted to one unit of overseas currency. This type of quotation is termed a “direct rate”.
A Spot rate is the rate of exchange for a foreign currency transaction which is to be settled within two working days of agreeing the rate.
A Forward rate is a rate of exchange which is fixed ‘now’ for a deal which will take place at a fixed date or between two days in the future.
Exchange Rate
Exchange Rate
FIXED EXCHANGE RATE
A fixed exchange rate system is one where the value of the exchange rate is fixed to another
currency. This means that the government have to intervene in the foreign
exchange market to maintain the fixed rate
Revaluation - this also describes an
upward movement in an exchange rate, but
in a fixed exchange rate system. This will be a very infrequent event (if ever) and
means the government has
deliberately changed the fixed value of the
exchange rate upwards.
Devaluation - this means that the government has
changed the fixed rate of a fixed exchange
rate downwards.
FLOATING EXCHANGE RATE
Where the exchange rate is floating (as are all
major currencies in the world), it will be
determined by market forces - that is supply and demand. As in any other
market, the rate will change constantly to
reflect how much of the currency is being traded.
However, what determines the supply
and demand for the currency?
Exchange Rate
Appreciation - this describes an upward movement in a freely floating exchange rate. This may occur day by day
or perhaps even minute by minute.Depreciation - this describes a downward movement in
a floating exchange rate.
Exchange Rate
Speculation Trade flows
Exchange rate Policy
Monetary Supply
The key factors affect
Exchange Rate
Exchange Rate
BOP will record:
ImportExport
Inflow of foreign investmentForeign revenue
If the foreign revenue is larger than payment, there will be a larger supply of foreign currencies.
If the foreign payment is larger than revenue, then the demand for
foreign currencies will be higher
Exchange Rate
Speculation Political and economic situation