Professional Documents
Culture Documents
Is a global decentralized or "over the counter" exchange happens to both parties present
Market trading of currency
Currency - Current – Circulation
Money in any form when it's use
Activities
Buying
Selling
Trading/Exchange
Participants.
1. Commercial banks & security leaders
2. Commercial companies MNC
3. Central Banks
4. Investment Management firms.
5. Non-bank foreign exchange- money changer
6. Retail foreign exchange traders- brokers
7. Money transfer or remittance company, Bureuax de change
2. Balance of payments model- focuses largely on tradable goods and services, ignoring the increasing role of
global capital flow
3. Asset market model - views currencies as an important asset class for constructing investment portfolios.
For shorter time frames (less than a few days)
Economic factors
Economic policy comprises government
Government Budget Deficities or surpluses
Balance of trade levels and trends
Inflation levels and trends
Economic growth and health
Productivity of an economy
Political conditions
Internal, regional, and international political conditions and events can have a profound effect on currency markets.
Market Psychology
Market psychology and trader perceptions influence the foreign exchange market in a variety of ways
Flights to quality
Long-term trends
Buy the rumor, sell the fact
Economic numbers
Technical trading consideration
Financial Instruments
Spot - A spot transaction is a two-day delivery transaction, as opposed to the futures contracts, which are
usually three months.
Forward- One way to deal with the foreign exchange risk is to engage in a forward transaction
Non -deliverable forward (NDF) -are derivatives that have no real deliver-ability.
Swap - In a swap, two parties exchange currencies for a certain length of time and agree to reverse the
transaction at a later date. These are not standardized contracts and are not traded through an exchange.
Futures -Futures are standardized forward contracts and are usually traded on an exchange created for this
purpose. The average contract length is roughly 3 months.
Option - Is a derivative where the owner has the right but not the obligation to exchange money
denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.