Foreign exchange markets

966 views

Published on

Published in: Business, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
966
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
58
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Foreign exchange markets

  1. 1. FOREIGN EXCHANGE MARKETS<br />
  2. 2. Contents<br />What is Foreign Exchange Markets?<br />Different players<br />History<br />Relevant acts<br />Need<br />Types<br />Factor influencing foreign exchange rate<br />Turnover<br />Foreign exchange reserves<br />Risk<br />
  3. 3. Foreign exchange market<br />It is the place where one currency is bought or sold for another currency<br />The foreign exchange market (forex) is a worldwide decentralized over-the-counter financial market for the trading of currencies<br />
  4. 4. Different players<br />
  5. 5. History: Pre Liberalization<br />India was under fixed exchange rate regime till March 1992; it was adjusted by the Central Bank<br />The exchange rate was continuously adjusted by small margins to adjust with<br />Changing inflation rates<br />International economic changes<br />Trade requirements<br />
  6. 6. History:postliberalisation<br />Rupee was made partially convertible on the current account<br />Dual exchange rate system:<br />40% at official exchange rate<br />60% at marketexchange rate<br />In 1993, this dual exchange rate system was removed and a single market determined exchange rate prevailed<br />
  7. 7. Foreign Exchange Rates<br />Fixed exchange rates<br />Bretton Woods System<br />Nixon Shock<br />Floating Exchange Rates<br />
  8. 8. Relevant acts<br />
  9. 9.
  10. 10. Need for foreign exchange market<br />
  11. 11. Types of foreign market<br />
  12. 12. Features of spot market<br />Simplest way to meet foreign currency requirements<br />Risk of exchange rate fluctuations<br />No certainty of the rate until the transaction is carried out<br />Larger the amount being dealt, better the spot rate that can be received<br />Spot deal settles in two working days after the deal is struck<br />
  13. 13. Features of forward market<br />Requires a more complicated calculation<br />Protects against unfavorable movements<br />Contracts are available for any period up to two years<br />
  14. 14. Factors influencing forex rate<br />Business cycles<br />Political developments<br />New tax laws<br />Stock market news<br />Inflationary expectations<br />International investment patterns<br />Government and central bank policies<br />
  15. 15. Turnover per day (as of dec’10)<br />Source: World Bank, World Development Indicators<br />
  16. 16. Foreign exchange reserves<br />Foreign Exchange Reserves of various countries (July 2010)<br />
  17. 17. Source: World Bank, World Development Indicators<br />
  18. 18. Foreign Exchange reserves of india<br />
  19. 19. Risk<br />Risk refers to the variability in investment’s value due to changes in currency exchange rates<br />Managing risk is central to successful investment in the forex market<br />Types of Risks<br />Transaction<br />Economic<br />Translation<br />
  20. 20. Risk (Contd.)<br />Transaction Risk:<br />Trade Transactions: Export and Import<br />Financial Transactions: Borrowing and Lending<br />Payments & Receipts of dividend and interest<br />
  21. 21. Risk (contd.)<br />Translational Risk:<br />Known as Consolidated Risk also<br />It refers to assets and liabilities of a Balance Sheet denominated in Foreign Risk<br />Comes into picture when foreign subsidiary is transferred to domestic country<br />
  22. 22. Risk (contd.)<br />Economic Risk:<br />Risk involved due to the future change in exchange rate<br />Methods to calculate Risk<br />Current/Non Current method<br />Monetary/Non Monetary method<br />Closing Rate Method<br />Temporal Method<br />
  23. 23. SUBMITTED by<br />GROUP 3<br />Suresh Kumar Kiran<br />K.P.V.S.Thushar<br />Muruganantham R<br />Deepesh T<br />Shiv<br />

×