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1. 1. Welcome to the World of Currencies<br />
2. 2. Currencies<br />Appreciation and Depreciation<br />
3. 3. Changes in the rate are expressed as appreciation or depreciation of one currency in terms of the other currency It is also referred to as strengthening or weakening of once currency vis-a-vis the other<br />
4. 4.
5. 5. Let’s look at an example:<br />1 USD = INR 40<br />Something costing 100\$ will cost Rs.4000/-<br />1 USD = INR 45<br />Something costing 100\$ will now cost Rs.4500/-<br />A Bigger value of the exchange rate means that our purchasing power is lower; it is a depreciation of the Rupee and appreciation of the dollar<br />
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7. 7. Let’s look at another example:<br />1 USD = INR 45<br />Something costing 100\$ will cost Rs.4500/-<br />1 USD = INR 40<br />Something costing 100\$ will now cost Rs.4000/-<br />A Lower value of the exchange rate means that our purchasing power is higher; it is an appreciation of the Rupee or you can say the Rupee has strengthened and a depreciation of the Dollar or the Dollar has depreciated<br />
8. 8. The “bid” is the price at which you can sell the base currency<br />The “offer” is the price at which you can buy the base currency<br />USD/INR<br />49.2225/49.2275<br />OFFER / ASK<br />BID<br />
9. 9. Bids and Offers are always for the Base currency<br />Traders always think in terms of how much it costs to buy or sell the base currency<br />On the trading screen, you’ll see two prices for each currency pair. The price on the left-hand side is called the bid and the price on the right-hand side is called the offer (some call this the ask)<br />
10. 10. Let’s look at an example:<br />The quote for the Dollar Rupee might be as follows:<br />USD/INR<br />49.2225/75<br />Here the bid price is 49.2225 per Dollar and <br />the offer price is 49.2275 per Dollar<br />Usually a market maker will simply give the quote as 25/75<br />
11. 11. The price quotation of each bid and offer you see will have two components:<br />Let’s look at an example:<br />The quote for the Dollar Rupee might be as follows:<br />USD/INR<br />49.2225/75<br />In the above example <br />- the Big figure is 49.22 and the dealing price is 25/75<br />
12. 12. USD/INR<br />49.2225/49.2275<br />0.0050<br />Spread<br />Spread is the difference between the bid and the ask<br />