tag:blogger.com,1999:blog-14615752749744269062024-02-20T12:41:14.366-08:00Foreign Exchange TransactionsAhmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-1461575274974426906.post-54249165465354644272009-09-27T10:07:00.000-07:002009-12-26T00:47:41.894-08:00RisksThere are risks associated with any market. It means variance of the returns and the possibility that the actual return might not be in line with the expected returns. The risks associated with trading foreign currencies are: market, exchange, Interest rate, yield curve, volatility, liquidity, forced sale, counter party, credit, and country risk.Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com5tag:blogger.com,1999:blog-1461575274974426906.post-56182112795549133912009-09-27T10:03:00.000-07:002009-09-27T10:05:52.373-07:00FEDAI<div align="justify">Foreign Exchange Dealers Association of India) is an association of all dealers in foreign exchange which sets the ground rules for fixation of commissions and other charges and also determines the rules and regulation relating to day-to-day transactions in foreign exchange in India. The FEDAI has commonly recognised 38 currencies for dealing.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-904607802884261282009-09-27T09:58:00.000-07:002009-09-27T09:59:08.457-07:00Risk Management<div align="justify">The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves, among others, consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-54154436605438452422009-09-27T09:57:00.002-07:002009-09-27T09:58:12.592-07:00Market Value<div align="justify">Market value of a forex position at any time is the amount of the domestic currency that could be purchased at the then market rate in exchange for the amount of foreign currency to be delivered under the forex Contract.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-27003680706979388952009-09-27T09:57:00.001-07:002009-09-27T09:57:46.979-07:00Marginal Risk<div align="justify">The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-57436393562512111002009-09-27T09:56:00.000-07:002009-09-27T09:57:10.295-07:00Margin<div align="justify">Collateral that the holder of a position in securities, options, Forex or futures contracts, has to deposit to cover the credit risk of his counterparty. Other definitions to MARGIN, used in other areas are:</div><div align="justify">(1) Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward.</div><div align="justify">(2) For options, the sum required as collateral from the writer of an option.</div><div align="justify">(3) For futures, a deposit made to the clearing house on establishing a futures position account. (4) The percentage reserve required by the US Federal Reserve to make an initial credit transaction.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-89964447492883495522009-09-27T09:55:00.001-07:002009-09-27T09:55:43.521-07:00Forex Deal<div align="justify">The purchase or sale of a currency against sale or purchase of another currency. The maximum time for a deal is defined when the deal opens, the deal can be closed at any moment until the expiry date and time. A deal cannot be closed on its first 3 minutes, due to technical reasons. </div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-24416956831541912252009-09-27T09:54:00.000-07:002009-09-27T09:55:13.278-07:00Floating Exchange Rate<div align="justify">When the value of a currency is decided by the market forces dictating the demand and supply of that particular currency.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-8883516143054781182009-09-27T09:53:00.000-07:002009-09-27T09:54:08.224-07:00Fixed Exchange Rate<div align="justify">Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention by the central bank.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-6341931136069994242009-09-27T09:51:00.000-07:002009-09-27T09:53:05.099-07:00Day Trading<div align="justify">A Day Trading deal is a currency exchange deal which renews automatically every night at 22:00 (GMT time) starting the day the deal was made and until it ends. The deal ends in one of the following events:</div><div align="justify">1.Termination initiated by you.</div><div align="justify">2.The day trading rate has reached the Stop-Loss or Take Profit rate you predefined.</div><div align="justify">3.The deal end date.</div><div align="justify">As long as the deal is open, it is charged a renewal fee every night at 22:00 (GMT time).</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-28469583569619918502009-09-27T09:50:00.000-07:002009-09-27T09:51:13.247-07:00Counter Party Risks<div align="justify">Foreign Currency Inter-bank Exchange (FOREX) instruments are Positions (Buys and/or Sell) between the Client and its Counterparty and, unlike exchange-traded foreign exchange instruments which are, in effect, guaranteed by a clearing organization affiliated with the exchange on which the instruments are traded, are not guaranteed by a clearing organization. Thus, when the Customer purchases an OTC foreign exchange instrument, it relies on the Counterparty from which it has purchased the instrument to fulfill the contract. Failure of a Counterparty to fulfill a Position could result in losses of any prior payment made pursuant to the Positions as well as the loss of the expected benefit of the transaction.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-54923344539431008572009-09-27T09:49:00.000-07:002009-09-27T09:50:13.186-07:00Broker<div align="justify">An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries. </div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-23119614121251266882009-09-27T09:48:00.000-07:002009-09-27T09:49:33.757-07:00Bid Price<div align="justify">Bid is the highest price that the seller is offering for the particular currency at the moment; the difference between the ask and the bid price is the spread. Together, the two prices constitute a quotation; the difference between the two is the spread. The bid-ask spread is stated as a percentage cost of transacting in foreign exchange. </div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-45434410681507965222009-09-27T09:26:00.000-07:002009-09-27T09:41:50.571-07:00Foreign Exchange Risk<div align="justify">The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced. For example, if an investor residing in the United States purchases a bond denominated in Japanese yen, a deterioration in the rate at which the yen exchanges for dollars will reduce the investor's rate of return, since he or she must eventually exchange the yen for dollars. Also called exchange rate risk. </div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-17340194170808302882009-09-27T09:20:00.000-07:002009-09-27T09:22:52.499-07:00Money Market<div align="justify">Money market is the centre for dealings mainly of a short term character in monetary assets. It embraces all the facilities of the country for the borrowing and lending of money for short terms. It transacts in short funds which are highly liquid and are known as near money. The capital market is primarily concerned with transactions in funds for relatively long term use.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-15247780199557895442009-09-27T09:15:00.000-07:002009-09-27T09:17:03.363-07:00International Liquidity (Bilateral/Multilateral Methods)<div align="justify">For solving the availability of internationally acceptable means of payments, International Monetary Fund, Special Drawing Rights (SDR's) Scheme etc. (IMF) have been established.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-11658728747092015792009-09-27T09:12:00.000-07:002009-09-27T09:14:11.762-07:00Transfer Moratoria (Bilateral/Multilateral Methods)<div align="justify">Under this system, the payments for the imported goods or the interest on foreign capital are not made immediately but are suspended for a predetermined period called as period of moratorium. A country adopts this method of exchange control for temporary solving its payments problems.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-13763844976572444882009-09-27T09:10:00.000-07:002009-09-27T09:12:05.658-07:00Clearing Agreement (Bilateral/Multilateral Methods)<div align="justify">Under this system, the governments of the two countries agree to clear the accounts in home currencies through their respectives central banks.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-45935321280347306392009-09-27T09:09:00.000-07:002009-09-27T09:10:41.885-07:00Multiple Exchange Rates (Unilateral Methods)<div align="justify">Under this system, different exchange rates are fixed for import and export of different commodities and for different countries. This system of exchange is adopted for earning maximum possible foreign exchange by increasing exports and reducing imports.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-45409796073922696382009-09-27T09:07:00.000-07:002009-09-27T09:08:53.815-07:00Rationing of Foreign Exchange (Unilateral Methods)<div align="justify">Under this system, the government momopolizes the foreign exchange reserves. The exporters are required to surrender foreign exchange earnings at the fixed exchange rate to the central bank of the country. The importers are allotted foreign exchange rate and in fixed amount.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-70894613610246296502009-09-27T09:01:00.000-07:002009-09-27T09:07:02.939-07:00Payment Agreements (Unilateral Methods)<div align="justify">The payment agreements are made between a debtor and a creditor country. This method of exchange control facilities the debtor country to make more and more exports to the creditor country and import less and less quantity from it. Under this system, the international transactions in foreign exchange are settled and cleared.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-60877063585914296142009-09-27T08:59:00.000-07:002009-09-27T09:06:27.730-07:00Blocked Accounts (Unilateral Methods)<div align="justify">Blocked accounts refer to a method by which the foreigners are restricted to transfer funds to their home countries. The extreme step of freezing the bank accounts of the foreigners is taken when the government faces the acute shortage of foreign exchange say in wartime.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-28122619592073020242009-09-27T08:57:00.000-07:002009-09-27T09:06:12.503-07:00Compensation Agreement (Unilateral Methods)<div align="justify">Compensation agreement resembles the old fashioned deal. The two countries import and export commodities from each other of equivalent value and so leave no balance requiring settlement in foreign exchange. Since no payment is made to foreign exchange, problem of foreign exchange does not arise.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-48936847356775017332009-09-27T08:53:00.000-07:002009-09-27T09:05:56.931-07:00Stand Still Agreement (Unilateral Methods)<div align="justify">Stand still agreement aims at maintaining status quo in the relationship between two countries in terms of capital movement. If a country is under debt to another country, payments of short term debts may be suspended for a given period by entering into an agreement called the standstill agreement. The creditor country allows the debtor country to repay the debts in easy instalments or convert the short terms debts into long terms debts.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0tag:blogger.com,1999:blog-1461575274974426906.post-11187160680358550462009-09-27T08:47:00.000-07:002009-09-27T09:05:41.003-07:00Clearing Agreement (Unilateral Methods)<div align="justify">Clearing agreement may be defined as an undertaking between two or more nations to buy and sell goods and services among themselves according to specified rate of exchange. The payments are to be made by buyers in the buyer's home currency. The balance, if any, is settled among the central banks of the nations at the end of stipulated periods either by exporging gold or of an acceptable third currency, or they are allowed to accumulate for another period in which the creditor country works off the balance by additional purchases from the debtor country. The main objectives for entering into clearing agreement are to liquidate the blocked accounts, to ensure quilibrium in the balance of payments and to check the fluctuating exchange rates.</div>Ahmedhttp://www.blogger.com/profile/03584550121492360912noreply@blogger.com0