Foreign

Exchange
Management
Foreign Exchange Market

 The foreign exchange market is

the market in which currencies
are bought and sold against
each other.

 The market where one currency

is traded for another is called
foreign exchange market.
Foreign Exchange Market

 Spot Market

 Forward Market
Spot Market

Spot market is the market where

the transactions are conducted
for the spot delivery of
currencies.

Spot delivery means the delivery

after two days the spot contract
is close.
Exchange Rate

 The rate at which one currency

is traded for another is called
exchange rate
The exchange rate for
immediate delivery is called
spot exchange rate and is
denoted by S(.)

where S(.) is the relationship

between two currencies
Example

S(Rs./$) = Rs.36.10/$

Is the relationship between rupees

and dollars, which says that one
dollar is equivalent to Rs.36.10
Forward Market

The forward market involves

contracting today for the future
purchase or sale of foreign
exchange.
Forward Exchange Rate

The exchange rates for delivery

and payment at specified future
dates are called forward
exchange rates and is denoted
by F(.)

F(.) specifies a relationship

between domestic and foreign
currency.