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