FOREIGN EXCHANGE QUOTATIONS & RATES
FOREX RATE : THE PRICE OF ONE CURRENCY QUOTED
IN TERMS OF ANOTHER CURRENCY.
THERE ARE ...
FOREIGN EXCHANGE QUOTATIONS &
RATES

THE AMERICAN QUOTATIONS ARE QUOTES GIVEN AS
“NUMBER OF US DOLLARS PER UNIT OF A
CURRE...
FOREIGN EXCHANGE QUOTATIONS &
RATES
INDIRECT QUOTES : STATED AS NUMBER OF
UNITS OF A FOREIGN CURRENCY PER UNIT OF
HOME CUR...
FOREIGN EXCHANGE QUOTATIONS &
RATES
CROSS RATES : GIVEN THE EXCHANGE RATES OF
TWO COUNTRIES, THE EXCHANGE RATE FOR A
THIRD...
FOREIGN EXCHANGE QUOTATIONS &
RATES
(i) COST OF ONE INR = 0.02538 USD
(ii) COST OF ONE BHATT = 0.02339 USD
OR 0.02339 USD ...
FOREIGN EXCHANGE QUOTATIONS &
RATES
T T BUYING RATE : THE BANKS QUOTE A VARIETY OF
EXCHANGE RATES. ONE OF THEM IS THE T T ...
FOREIGN EXCHANGE QUOTATIONS &
RATES
AS FOR EXAMPLE : YOU PURCHASE FROM CITI BANK IN NEW
YORK A DD OF 2000 USD, DRAWN ON CI...
FOREIGN EXCHANGE QUOTATIONS &
RATES
ANOTHER EXAMPLE COULD BE : AN EXPORTER
ASSIGNS THE BANK THE RESPONSIBILITY OF
COLLECTI...
FOREIGN EXCHANGE QUOTATIONS &
RATES
BILL BUYING RATE : EXPORTERS FREQUENTLY DRAW
BILLS OF EXCHANGE ON THEIR FOREIGN
CUSTOM...
FOREIGN EXCHANGE QUOTATIONS &
RATES
SINCE, THERE IS DELAY BETWEEN THE AD PAYING
THE EXPORTER AND ITSELF GETTING PAID,
VARI...
FOREIGN EXCHANGE QUOTATIONS &
RATES
EXCHANGE MARGIN : THE BANKS HAVE TO
TRANSMIT OR TRANSIT THE CHEQUES OR BILLS
IT HAS RE...
FOREIGN EXCHANGE QUOTATIONS &
RATES
FORWARD MARGIN : BILLS ARE OF TWO KINDS. SIGHT OR
DEMAND BILLS REQUIRE PAYMENT BY THE ...
FOREIGN EXCHANGE QUOTATIONS &
RATES
BILL SELLING RATE : WHEN AN IMPORTER REQUESTS
THE BANK TO MAKE PAYMENT TO A FOREIGN
SU...
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Foreign exchange rates & quotes

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Foreign exchange rates & quotes

  1. 1. FOREIGN EXCHANGE QUOTATIONS & RATES FOREX RATE : THE PRICE OF ONE CURRENCY QUOTED IN TERMS OF ANOTHER CURRENCY. THERE ARE TWO TYPES OF QUOTATIONS IN THE FOREX MARKET. THE AMERICAN QUOTATIONS AND THE EUROPEAN QUOTATIONS. THE EUROPEAN QUOTATIONS ARE QUOTES GIVEN AS “NUMBER OF UNITS OF A CURRENCY PER US DOLLAR. EXAMPLE : JPY125.65/USD, INR48.75/USD.
  2. 2. FOREIGN EXCHANGE QUOTATIONS & RATES THE AMERICAN QUOTATIONS ARE QUOTES GIVEN AS “NUMBER OF US DOLLARS PER UNIT OF A CURRENCY”. EXAMPLE : USD0.8775/EUR, USD1.6542/GBP ETC. DIRECT QUOTES : IN A COUNTRY, DIRECT QUOTES ARE THOSE THAT GIVE UNITS OF THE HOME CURRENCY PER UNIT OF A FOREIGN CURRENCY. FOR EXAMPLE : INR48.59/USD IS A DIRECT QUOTE IN INDIA, USD 0.6385/CHF IS A DIRECT QUOTE IN ………
  3. 3. FOREIGN EXCHANGE QUOTATIONS & RATES INDIRECT QUOTES : STATED AS NUMBER OF UNITS OF A FOREIGN CURRENCY PER UNIT OF HOME CURRENCY. THUS, USD 0.04132/INR IS A INDIRECT QUOTE IN INDIA AND JPY 0.243/USD IS AN INDIRECT QUOTE IN AMERICA.
  4. 4. FOREIGN EXCHANGE QUOTATIONS & RATES CROSS RATES : GIVEN THE EXCHANGE RATES OF TWO COUNTRIES, THE EXCHANGE RATE FOR A THIRD COUNTRY CAN ALSO BE FOUND OUT. USD 0.02339/BHATT , USD 0.02538 / INR. WHAT WILL BE THE INR TO BHATT EXCHANGE RATE ?
  5. 5. FOREIGN EXCHANGE QUOTATIONS & RATES (i) COST OF ONE INR = 0.02538 USD (ii) COST OF ONE BHATT = 0.02339 USD OR 0.02339 USD = ONE BHATT OR 1 USD = ONE BHATT/0.02339 OR 0.02538 USD = ONE BHATT X 0.02538 0.02339 OR ONE INR = 1.085 BHATT.
  6. 6. FOREIGN EXCHANGE QUOTATIONS & RATES T T BUYING RATE : THE BANKS QUOTE A VARIETY OF EXCHANGE RATES. ONE OF THEM IS THE T T BUYING RATE (T T STANDS FOR TELEGRAPHIC TRANSFER). T T RATES ARE APPLICABLE FOR CLEAN INWARD OR OUTWARD REMITTANCES WHERE THE BANKS UNDERTAKE ONLY THE JOB OF MONEY TRANSFER AND DO NOT HAVE TO PERFORM ANY OTHER FUNCTION , SUCH AS HANDLING DOCUMENTS.
  7. 7. FOREIGN EXCHANGE QUOTATIONS & RATES AS FOR EXAMPLE : YOU PURCHASE FROM CITI BANK IN NEW YORK A DD OF 2000 USD, DRAWN ON CITI BANK-MUMBAI. THE NEW YORK BANK WILL CREDIT THE MUMBAI BANK’S ACCOUNT IMMEDIATELY. WHEN YOU COME BACK TO MUMBAI AND PRESENT THE DD AT CITI BANK – MUMBAI , THE PARTICULAR BRANCH WILL PAY YOU AS PER THE TT – BUYING RATE. THE RATE AT WHICH THE NEW YORK BANK HAD SOLD THE DD TO YOU IS THE TT SELLING RATE.
  8. 8. FOREIGN EXCHANGE QUOTATIONS & RATES ANOTHER EXAMPLE COULD BE : AN EXPORTER ASSIGNS THE BANK THE RESPONSIBILITY OF COLLECTION OF AN EXPORT BILL. THE BANK MAY PAY TO THE EXPORTER BEFORE THE COLLECTION OF THE BILL. HERE ALSO, WHILE MAKING THE PAYMENT THE BANK WILL ADOPT THE T T BUYING RATE. (IN THIS CASE THERE WILL BE ADDITIONAL FLAT FEES APPLICABLE).
  9. 9. FOREIGN EXCHANGE QUOTATIONS & RATES BILL BUYING RATE : EXPORTERS FREQUENTLY DRAW BILLS OF EXCHANGE ON THEIR FOREIGN CUSTOMERS. THEN THEY SELL THESE BILLS TO AN AUTHORISED DEALER IN FOREIGN CURRENCY. THE AUTHORISED DEALER BUYS THE BILL AND THEN COLLECTS THE PAYMENT FROM THE IMPORTER.
  10. 10. FOREIGN EXCHANGE QUOTATIONS & RATES SINCE, THERE IS DELAY BETWEEN THE AD PAYING THE EXPORTER AND ITSELF GETTING PAID, VARIOUS MARGINS ARE SUBSTRACTED FROM THE BASE RATE TO COMPUTE THE BILL BUYING RATE. SO, BILL BUYING RATE = THE BASE RATE minus EXCHANGE MARGIN minus FORWARD DISCOUNT.
  11. 11. FOREIGN EXCHANGE QUOTATIONS & RATES EXCHANGE MARGIN : THE BANKS HAVE TO TRANSMIT OR TRANSIT THE CHEQUES OR BILLS IT HAS RECEIVED, IN WHICH, CONSIDERABLE AMOUNT OF TIME AND SOME MONEY IS SPENT. IN ORDER TO RECOVER THIS ALONG WITH PROFIT THE BANK OR AD CHARGES EXCHANGE MARGIN.
  12. 12. FOREIGN EXCHANGE QUOTATIONS & RATES FORWARD MARGIN : BILLS ARE OF TWO KINDS. SIGHT OR DEMAND BILLS REQUIRE PAYMENT BY THE DRAWEE ON PRESENTATION. THE DELAY INVOLVED IN PAYMENT OF SUCH BILLS IS THE TRANSIT PERIOD. TIME OR USAGE BILLS GIVE TIME TO THE IMPORTER TO SETTLE THE PAYMENT WHICH MEANS THAT THE EXPORTER HAS GIVEN CREDIT TO THE IMPORTER. IN SUCH CASES THE DELAY IS BOTH BECAUSE OF TRANSIT AND CREDIT PERIOD. IN ADDITION TO THE EXCHANGE MARGIN TO COVER COSTS AND PROFIT THE AD LOADS FORWARD MARGIN FOR AN APPROPRIATE PERIOD TO COVER THE DELAY DUE TO CREDIT.
  13. 13. FOREIGN EXCHANGE QUOTATIONS & RATES BILL SELLING RATE : WHEN AN IMPORTER REQUESTS THE BANK TO MAKE PAYMENT TO A FOREIGN SUPPLIER, AGAINST A BILL DRAWN ON AN IMPORTER, THE BANK HAS TO HANDLE DOCUMENTS RELATED TO THE TRANSACTION. FOR THIS, THE BANK LOADS ANOTHER MARGIN ON THE BASE RATE TO ARRIVE AT THE BILL SELLING RATE. HENCE BILL SELLING RATE = BASE RATE + EXCHANGE MARGIN.
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