FX Literacy Program

8/6/2019 FX Literacy Program

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Foreign Exchange

Literacy Program

Sponsor:

International Treasury


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What is Foreign Exchange

The buying or selling of one currency

against another currency

Also Foreign Exchange is also called FXor Forex


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Foreign Exchange Market

Biggest global market

Trading is almost 24/7

Daily trading volume is about 1.3 TrillionDollars

Most liquid market in the world


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Foreign Exchange Market Players

Central Banks

Banks

Corporations Importers and Exporters

Private Investors

Tourists


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Major Currency Pairs

British Pound (GBP/USD)

Euro (EUR/USD)

Australian Dollar (AUD/USD) New Zealand Dollar (NZD/USD)

Canadian Dollar (USD/CAD)

Swiss Franc (USD/CHF) Japanese Yen (USD/JPY)


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Asian Currencies

Singapore Dollar (USD/SGD)

Hong Kong Dollar (USD/HKD)

Taiwan Dollar (USD/TWD) Philippine Peso (USD/PHP)

Chinese Yuan (USD/CNY)

South Korean Won (USD/KRW)


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Currency Notation

Ex: AUD/USD 1.0750

In this example the AUD is the COMMODITYcurrency and the USD is the TERM currency

The Commodity Currency is the currency that isbeing bought or sold in TERMs of the TermCurrency

In the example, 1 AUD is equal to 1.0750 USD

If we have 1000 AUD how much USD will we have?Answer 1,075.00 USD (1000 AUD x 1.0750 USD)


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Currency Notation

Ex: GBP/USD 1.6500

In this example the GBP is the COMMODITYcurrency and the USD is the TERM currency


In the example, 1 GBP is equal to 1.6500 USD

If we have 1000 GBP how much USD will wehave? Answer 1,6500.00 USD (1000 GBP x1.6500 USD)


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Currency Notation

Ex: USD/CAD 0.9800

In this example the USD is the COMMODITYcurrency and the CAD is the TERM currency


In the example, 1 USD is equal to 0.9800 CAD

If we have 1000 CAD how much USD will wehave? Answer 1020.00 USD (1000 CAD /0.9800 USD)


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The Concept of the Bid and Offer

The Market always gives two way

quotes. This is called the Bid and the Offer

Example: USD/PHP Please?

Market Quotes: 43.10 / 43.12

43.10is theBID

43.12 is the OFFER


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Defining the BID Price

The BID price is where the market is willing to BUY theCommodity Currency and SELL the TERM Currency.

THE BID price is also where a client can SELL theCommodity Currency since the Market is willing to BUY

at this price. Market Quotes: USD/PHP 43.10 / 43.12

The BID is 43.10 this means the Market is willing to buyyour USD @ 43.10

So, if you have USD 10,000 and you want to sell it forUSD, the Market will BUY your USD @ 43.10 and youwill get Php 431,000.00 in return.


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Defining the OFFER

The OFFER price is where the market is willing to SELLthe Commodity Currency and BUY the TERM Currency.

THE OFFER price is also where a client can BUY theCommodity Currency since the Market is willing to SELL at

this price. Market Quotes: USD/PHP 43.10 / 43.12

The BID is 43.12 this means the Market is willing to SELLyou USD @ 43.12

So, if you want to BUY USD 10,000, you can buy it @

43.12. This means you will have to pay the MARKET PHP431,200.00 in and get USD 10,000.


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Defining the OFFER

The OFFER price is where the market is willing to SELLthe Commodity Currency and BUY the TERM Currency.

THE OFFER price is also where a client can BUY theCommodity Currency since the Market is willing to SELL at

this price. Market Quotes: USD/PHP 43.10 / 43.12

The BID is 43.12 this means the Market is willing to SELLyou USD @ 43.12

So, if you want to BUY USD 10,000, you can buy it @

43.12. This means you will have to pay the MARKET PHP431,200.00 in and get USD 10,000.


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Example 1

USD/CAD = 0.9768 / 0.9773

A client wishes to buy 100,000 Canadian dollars and pay in USD.

Which side should we use?

How much should the client pay in USD?

Answer

We are going to sell Canadian dollars, So We need to look on the

bid side

0.9768

100,000*0.9768 = USD 97,680 The client should pay 97,680 USD


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Example 2

USD/SGD 1.2374-1.2378

A client wishes to sell 100,000 Singapore dollars and We will pay in USD


How much should the client receive in USD?

Answer We are going to buy Singapore dollars, So We need to look on the offer

side

1.2378

100,000/1.2378= USD 80,788.50

The client should receive 80,788.50 USD


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Example 3

GBP/USD = 1.6273 / 1.6276

A client wishes to buy 100,000 sterling and pay in USD.



Answer

We are going to sell sterling, So We need to look on the offer side 1.6276

100,000*1.6276 = USD 162,760

The client should pay 162,760 USD


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Example 4

AUD/USD = 1.0565 / 1.0570

A client wishes to sell 100,000 Australian dollars and We will pay in USD



Answer

We are going to buy Australian Dollars, So We need to look on the bid side 1.0565

100,000*1.0565 = 105,650 USD

The client should receive 105,650 USD


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Example 5

USD/PHP = 43.33 / 43.38

A client wishes to sell 100,000 USD and and will pay in PHP


How much should the client receive in php?

Answer

We are going to buy USD, So We need to look on the bid side 43.33

100,000*43.33 = 4,333,000 PHP

The client should receive 4,333,000 PHP


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Example 6

EUR/USD = 1.4357 / 1.4360

A client wishes to buy 100,000 Euro and pay in USD



Answer

We are going to sell EURO, So We need to look on the offer side 1.4360

100,000*1.4360 = 143,600 USD

The client should pay 143,600 USD


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Example 7

USD/HKD = 7.7780 / 7.7787

A client wishes to buy 100,000 Hong Kong dollars and pay in USD



Answer

We are going to sell Hong Kong dollars, So We need to look on the bid side 7.7780

100,000/7.7780 = 12,856.78 USD

The client should pay 12,856.78 USD


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Example 8

NZD/USD = 0.8126 / 0.8131

A client wishes to sell 100,000 New Zealand dollars and We will pay in USD



Answer

We are going to buy NZD, So We need to look on the bid side 0.8126

100,000*0.8126 = 81,260 USD

The client should receive 81,260 USD


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Example 9

USD/TWD = 28.715 / 28.718

A client wishes to buy 100,000 Taiwan dollars and pay in USD



Answer

We are going to sell, So We need to look on the bid side 28.715

100,000/28.715 = 3,482.50 USD

The client should pay 3,482.50 USD


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Example 10

USD/JPY = 80.179 / 80.181

A client wishes to sell 100,000 Japanese Yen and We will pay in USD



Answer

We are going to buy, So We need to look on the offer side 80.181

100,000*80.181 = 1,247.18 USD

The client should receive 1,247.18 USD


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Example 11

GBP/USD 1.6332 / 1.6335

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 GBP and will pay in Peso PHP (GBP/PHP)


How much should the client pay in PHP?

Answer

We are going to sell GBP against the USD and also sell the USD against PHP so weneed to look both on the offer side of GBP/USD and USD/PHP to get the rate

1.6335 and 43.34

1.6335*43.34= 70.79 GBP/PHP

100,000*70.79= 7,079,000 PHP

The client should pay 7,079,000 PHP


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Example 12

EUR/USD 1.4355 / 1.4360

USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 EUR and will receive payment in Peso PHP (EUR/PHP)


How much should the client receive in PHP?

Answer

We are going to buy EUR against the USD and buy the USD against PHP so we needto look both on the BID side of EUR/USD and USD/PHP to get the rate

1.4355 and 43.32

1.4355*43.32= 62.19 EUR/PHP

100,000*62,19= 6,219,000 PHP



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Example 13

AUD/USD 1.0578 / 1.0583

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 AUD and will pay in Peso PHP (AUD/PHP)



Answer

We are going to sell AUD against USD and Sell USD against PHP so we need to lookboth on the offer side of AUD/USD and USD/PHP to get the rate

1.0583 and 43.34

1.0583*43.34= 45.87 AUD/PHP

100,000*45.87= 4,587,000 PHP



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Example 14

NZD/USD 0.8183 / 0.8187

USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 NZD and will receive payment in Peso PHP(NZD/PHP)



Answer We are going to buy NZD against USD and buy USD against PHP so we need tolook both on the bid side of NZD/USD and USD/PHP to get the rate

0.8183 and 43.32

0.8183*43.32= 35.45 NZD/PHP

100,000*35.45= 3,545,000 PHP



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Example 15

USD/CAD 0.9793 / 0.9796

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 CAD and will pay in Peso PHP (CAD/PHP)



Answer

We are going to sell CAD against USD and sell the USD against PHP so weneed to look on the bid side of USD/CAD and offer side USD/PHP to get the rate

0.9793 and 43.34

43.34/0.9793= 44.26 CAD/PHP

100,000*44.26= 4,426,000 PHP



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Example 16

USD/SGD 1.2305 / 1.2310

USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 SGD and will receive payment in Peso PHP(SGD/PHP)



Answer We are going to buy SGD against USD and buy USD against PHP so we need tolook on the offer side of USD/SGD and bid side USD/PHP to get the rate

1.2310 and 43.32

43.32/1.2310 = 35.19 SGD/PHP

100,000*35.19= 3,519,000 PHP



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Example 17

USD/HKD 7.7840 / 7.7845

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 HKD and will pay in Peso PHP (HKD/PHP)



Answer

We are going to sell HKD against USD and sell USD against PHP so we needto look on the bid side of USD/HKD and offer side USD/PHP to get the rate

7.7840 and 43.34

43.34/7.7840 = 5.58 HKD/PHP

100,000*5.58= 558,000 PHP

The client should pay 558,000 PHP


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Example 18

USD/TWD 28.790/ 28.795

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 TWD and will pay in Peso PHP (TWD/PHP)



Answer

We are going to sell TWD against USD and sell USD against PHP so we needto look on the bid side of USD/TWD and offer side USD/PHP to get the rate

28.790 and 43.34

43.34/28.790 = 1.5054 TWD/PHP

100,000*1.5054= 150,540 PHP



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Example 19

USD/MYR 3.3033 / 3.3036 USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 MYR and will in Peso PHP (MYR/PHP)



Answer

We are going to buy MYR against USD and buy USD against PHP so we needto look on the offer side of USD/MYR and bid side USD/PHP to get the rate

3.3036 and 43.32

43.32/3.3036 = 13.11 MYR/PHP

100,000*13.11= 1,313,000 PHP



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Example 20

USD/JPY 80.31/ 80.33 USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 JPY and will pay in Peso PHP (JPY/PHP)



Answer

We are going to sell JPY against USD and sell USD against PHP so we need tolook on the bid side of USD/JPY and offer side USD/PHP to get the rate

80.31 and 43.34

43.34/80.31= 0.5397 JPY/PHP

100,000*0.5397= 53,970 PHP

The client should receive 541,000 PHP


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Example 21

GBP/USD 1.6332 / 1.6335

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 GBP and will pay in Peso PHP (GBP/PHP) with .30 spread



Answer

We are going to sell GBP against the USD and also sell the USD against PHP so we needto look both on the offer side of GBP/USD and USD/PHP to get the rate

plus 0.30 cents to get the rate

1.6335 and 43.64

1.6335*43.64= 71.29 GBP/PHP

100,000*71.29= 7,129,000 PHP



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Example 22

EUR/USD 1.4355 / 1.4360

USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 EUR and will receive payment in Peso PHP (EUR/PHP)with 0.30 spread



Answer

We are going to buy EUR against the USD and buy the USD against PHP so we need tolook both on the BID side of EUR/USD and USD/PHP to get the rate less 0.30 cents toget the rate

1.4355 and 43.02

1.4355*43.32= 61.76 EUR/PHP

100,000*61.76= 6,176,000 PHP



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Example 23

AUD/USD 1.0578 / 1.0583

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 AUD and will pay in Peso PHP (AUD/PHP) with .30 spread



Answer

We are going to sell AUD against USD and Sell USD against PHP so we need to lookboth on the offer side of AUD/USD and USD/PHP to get the rate plus 30 cents to get therate

1.0583 and 43.64

1.0583*43.64= 46.18 AUD/PHP

100,000*45.87= 4,618,000 PHP



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Example 24

NZD/USD 0.8183 / 0.8187

USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 NZD and will receive payment in Peso PHP (NZD/PHP) with0.30 spread



Answer

We are going to buy NZD against USD and buy USD against PHP so we need to look bothon the bid side of NZD/USD and USD/PHP to get the rate

less 30 cents to get the rate

0.8183 and 43.02

0.8183*43.02= 35.20 NZD/PHP

100,000*35.20= 3,520,000 PHP



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Example 25

USD/CAD 0.9793 / 0.9796

USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 CAD and will pay in Peso PHP (CAD/PHP) with 0.30spread



Answer

We are going to sell CAD against USD and sell the USD against PHP so we need to lookon the bid side of USD/CAD and offer side USD/PHP to get the rate plus 30 cents to getthe rate

0.9793 and 43.64

43.34/0.9793= 44.56 CAD/PHP

100,000*44.56= 4,456,000 PHP



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Example 26

USD/SGD 1.2305 / 1.2310

USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 SGD and will receive payment in Peso PHP (SGD/PHP) with0.30 spread



Answer

We are going to buy SGD against USD and buy USD against PHP so we need to look onthe offer side of USD/SGD and bid side USD/PHP to get the rate

less 30 cents to get the rate

1.2310 and 43.02

43.02/1.2310 = 34.95 SGD/PHP

100,000*35.19= 3,495,000 PHP



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Example 27

USD/HKD 7.7840 / 7.7845 USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 HKD and will pay in Peso PHP (HKD/PHP) with 0.30spread



Answer

We are going to sell HKD against USD and sell USD against PHP so we need to look

on the bid side of USD/HKD and offer side USD/PHP plus 30 cents to get the rate

7.7840 and 43.64

43.64/7.7840 = 5.61 HKD/PHP

100,000*5.61= 561,000 PHP



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Example 28

USD/TWD 28.790/ 28.795 USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 TWD and will pay in Peso PHP (TWD/PHP) with 0.30spread



Answer

We are going to sell TWD against USD and sell USD against PHP so we need to lookon the bid side of USD/TWD and offer side USD/PHP plus 30 cents to get the rate

28.790 and 43.64

43.64/28.790 = 1.5158 TWD/PHP

100,000*1.5158= 151,580 PHP



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Example 29

USD/MYR 3.3033 / 3.3036 USD/PHP 43.32 / 43.34

A client wishes to sell 100,000 MYR and will in Peso PHP (MYR/PHP)



Answer We are going to buy MYR against USD and buy USD against PHP sowe need to look on the offer side of USD/MYR and bid side USD/PHPless 30 cents to get the rate

3.3036 and 43.02

43.02/3.3036 = 13.02 MYR/PHP

100,000*13.02= 13,020,000 PHP The client should receive 13,020,000 PHP


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Example 30

USD/JPY 80.31/ 80.33 USD/PHP 43.32 / 43.34

A client wishes to buy 100,000 JPY and will pay in Peso PHP (JPY/PHP) with 0.30 spread



Answer

We are going to sell JPY against USD and sell USD against PHP so we need to look onthe bid side of USD/JPY and offer side USD/PHP to get the rate

plus 30 cents to get the rate

80.31 and 43.64

43.64/80.31= 0.5434 JPY/PHP

100,000*0.5434= 54,340 PHP


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FX Literacy Program