8/6/2019 for-ex ppt(1)

1/22

FOREIGN EXCHANGE MARKETStudents of SYBFM presents the

topic:-

8/6/2019 for-ex ppt(1)

2/22

GROUP MEMBERS

POOJA PARIKH (521)

DIVYA RAJA (520)

PRIYANKA PATIL

KRIMA

HINAL PATEL (

8/6/2019 for-ex ppt(1)

3/22

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$

8/6/2019 for-ex ppt(1)

4/22

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

8/6/2019 for-ex ppt(1)

5/22

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

8/6/2019 for-ex ppt(1)

6/22

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.

8/6/2019 for-ex ppt(1)

7/22

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

8/6/2019 for-ex ppt(1)

8/22

FUNCTIONS

A. Transfer function

B. Credit function

C. Hedging

D. Primary function

E. International transactions

F. Currency value

G. Investment

8/6/2019 for-ex ppt(1)

9/22

ADVANTAGES OFFOREX

1. High leverage

2. No commission

3. High liquidity4. Profitability

5. 24hrs trading

8/6/2019 for-ex ppt(1)

10/22

DISADVANTAGES OF FOREX

1. High leverage

2. 24hrs trading

8/6/2019 for-ex ppt(1)

11/22

8/6/2019 for-ex ppt(1)

12/22

FOREX INSTRUMENTS

Forexinstruments

SPOT

FORWARD

FUTURE

SWAP

OPTION

ETFs

8/6/2019 for-ex ppt(1)

13/22

CURRENCIES TRADED

Major

EURO

USD $

GBP

CHFSfr

Minor

AUS $

NZD $

CAN $

INRRs.

8/6/2019 for-ex ppt(1)

14/22

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

8/6/2019 for-ex ppt(1)

15/22

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)

8/6/2019 for-ex ppt(1)

16/22

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.

8/6/2019 for-ex ppt(1)

17/22

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

8/6/2019 for-ex ppt(1)

18/22

8/6/2019 for-ex ppt(1)

19/22

RBIS ROLE IN FOREX MARKET

1. Exposure Limit

2. Treasury operations at RBI

3. RBIs Monitoring

4. Intervention

5. Foreign Exchange Exposure

Limit(FEEL)

8/6/2019 for-ex ppt(1)

20/22

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

8/6/2019 for-ex ppt(1)

21/22

8/6/2019 for-ex ppt(1)

22/22