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FOREIGN EXCHANGE MARKETStudents of SYBFM presents the
topic:-
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GROUP MEMBERS
POOJA PARIKH (521)
DIVYA RAJA (520)
PRIYANKA PATIL
KRIMA
HINAL PATEL (
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INTRODUCTION
Financial market huge for trading of
world currencies.
It has been working since the 70s of
the twentieth century
Daily volumes exceeds 4 trillion
dollars
Main currency US$
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According to Kindleberger, "It is place where
foreign moneys are bought and sold.
The foreign exchange market provides the foreign
currency against any national currency
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UNIQUENESS OF FOREX MARKET
Its huge trading volume, leading to high liquidity
Its geographical dispersion
Its continuous operation: 24 hours a day except
weekends, i.e. trading from 20:15 GMT on Sundayuntil 22:00 GMT Friday
The variety of factors that affect exchange rates
The low margins of relative profit compared with
other markets of fixed income
The use of leverage to enhance profit margins with
respect to account size
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HISTORY
Historically the value of goods was expressed
through some other goods
In different places everything from teeth to
jewelry has served this purpose but later metals,and especially gold and silver, were introduced as
an accepted means of payment, and also a
reliable form of value storage.
Coins were basically minted from the metal, but
stable political systems introduced a paper form
of IOUs (I owe you)
Before First World War most central banks
supported currencies with gold.
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Closure to the the end of second world war
the Bretton woods agreement was signed in
July in US 1944
The Bretton Woods agreement resulted in asystem of fixed exchange rates
The Bretton Woods system came under
increasing pressure as national economies
moved in different directions during the
sixties
The EEC (European Economic Community)
introduced
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FUNCTIONS
A. Transfer function
B. Credit function
C. Hedging
D. Primary function
E. International transactions
F. Currency value
G. Investment
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ADVANTAGES OFFOREX
1. High leverage
2. No commission
3. High liquidity4. Profitability
5. 24hrs trading
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DISADVANTAGES OF FOREX
1. High leverage
2. 24hrs trading
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FOREX INSTRUMENTS
Forexinstruments
SPOT
FORWARD
FUTURE
SWAP
OPTION
ETFs
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CURRENCIES TRADED
Major
EURO
USD $
GBP
CHFSfr
Minor
AUS $
NZD $
CAN $
INRRs.
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CURRENCIES TRADED
Rank Currency % Daily share
1 United States dollar 84.9
2 Euro 39.1
3 Japanese yen 19.0
4 Pound sterling 12.9
5-6 Australian dollar 7.6
5-6 Swiss franc 6.4
5-6 Canadian dollar 5.3
7 Hong Kong dollar 2.48 Swedish krona 2.2
9-10 New Zealand dollar 1.6
Other currencies 18.6
Total 200
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WORKING OF FOREX
Interbank quotations are given as :-
y Bidy Ask (also referred to as offer)
y Price maker
y Price taker
QuotesExample :
The exchange rate between US dollars and the Swiss franc is
normally
stated :
CHF/USD: Fr 1.6000 (European terms)
USD /CHF : $ 0.6250 (American terms)
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CONTD
Transactions Settlementy NOSTRO
y VOSTRO
SWIFT (Society for Worldwide InterbankFinancial Telecommunications)
NET OPEN POSITION- (NOP)
y NAP also called LONG or Overbought position.
y NLP also called SHORT or Oversold position.
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MARKET PARTICIPANTS
The foreign exchange market consists oftwo
tiers:
y The interbank or wholesale market (multiples of
$1MM USD or equivalent in transaction size)
y The client or retail market (specific, smaller
amounts)
Five broad categories of participants
operate within these two tiers;y 1. Bank and Nonbank Foreign Exchange Dealers
y 2. Individuals and Firms
y 3. Speculators and Arbitragers
y 4. Central Banks and Treasuries
y
5. Foreign Exchange Brokers
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RBIS ROLE IN FOREX MARKET
1. Exposure Limit
2. Treasury operations at RBI
3. RBIs Monitoring
4. Intervention
5. Foreign Exchange Exposure
Limit(FEEL)
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TOP TRADERS OF THE MARKET
(MAY2010)
Rank Name Market Share(%)
1 Deutsche Bank 18.06
2 UBS AG 11.30
3 Barclays Capital 11.08
4 Citi Bank 7.69
5 Royal Bank of Scotland 6.50
6 JP Morgan 6.35
7 HSBC 4.558 Credit Suisse 4.44
9 Goldman Sachs 4.28
10 Morgan Stanley 2.91
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