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The foreign exchange market or forex market as it is often called is the market in which currencies are traded.
Currency Trading is the world’s largest market consisting of almost trillion in daily volumes
The market continues to rapidly grow. Not only is the forex market the largest market in the world, but it is also the most liquid, differentiating it from the other markets.
There is no central marketplace for the exchange of currency, but instead the trading is conducted over-the-counter.
This decentralization of the market allows traders to choose from a number of different dealers to make trades with and allows for comparison of prices. Typically, the larger a dealer is the better access they have to pricing at the largest banks in the world, and are able to pass that on to their clients.
The spot currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers.
All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency.
The first currency of a currency pair is called the “base currency,” while the second currency is called the counter currency. The currency pair shows how much of the counter currency is needed to purchase one unit of the base currency.
Currency pairs can be thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold.
Forex Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market.
It allows you to experience every step of currency trading including choosing currency pairs, deciding how much risk to take, tracking the time and dates of placed trades, deciding how long to stay in the trade, and when to exit the trade. It also allows the placing of stop and limit orders on trades.
Information about trading and specifically about how to use the online trading platform can be found on the FXCM webpage. In addition, FXCM offers FREE interactive online seminars that are extremely useful to both new and experienced currency traders.
Characteristics of foreign exchange
Its huge trading volume representing the largest asset class in the world leading to high liquidity;
Its geographical dispersion;
Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
The variety of factors that affect exchange rates;
The low margins of relative profit compared with other markets of fixed income;
The use of leverage to enhance profit and loss margins and with respect to account size.
The foreign exchange market or forex market as it is often called is the market in which currencies are traded.
Currency Trading is the world’s largest market consisting of almost trillion in daily volumes
The market continues to rapidly grow. Not only is the forex market the largest market in the world, but it is also the most liquid, differentiating it from the other markets.
There is no central marketplace for the exchange of currency, but instead the trading is conducted over-the-counter.
This decentralization of the market allows traders to choose from a number of different dealers to make trades with and allows for comparison of prices. Typically, the larger a dealer is the better access they have to pricing at the largest banks in the world, and are able to pass that on to their clients.
The spot currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers.
All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency.
The first currency of a currency pair is called the “base currency,” while the second currency is called the counter currency. The currency pair shows how much of the counter currency is needed to purchase one unit of the base currency.
Currency pairs can be thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold.
Forex Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market.
It allows you to experience every step of currency trading including choosing currency pairs, deciding how much risk to take, tracking the time and dates of placed trades, deciding how long to stay in the trade, and when to exit the trade. It also allows the placing of stop and limit orders on trades.
Information about trading and specifically about how to use the online trading platform can be found on the FXCM webpage. In addition, FXCM offers FREE interactive online seminars that are extremely useful to both new and experienced currency traders.
Characteristics of foreign exchange
Its huge trading volume representing the largest asset class in the world leading to high liquidity;
Its geographical dispersion;
Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
The variety of factors that affect exchange rates;
The low margins of relative profit compared with other markets of fixed income;
The use of leverage to enhance profit and loss margins and with respect to account size.
This presentation is a comprehensive presentation of Forex Market. It starts with the history of this market from Pre Gold period, Bretton wood till current floating exchange mechanism and in Indian perspective FERA and FEMA. It then gives you an idea on size, width and extent of this market and post that it covers forex exchange, quotes, and numerical. Finally, it covers few topics like Trade Finance, LIBOR, Balance of Payment & Currency Swaps
The aim of this presentation is to help build a better understanding of Forex trading and guide you through the necessary steps needed to become a responsible and successful trader in the foreign exchange market.
The ppt gives a description of how different theories define working of forex market. ?
when & where do these theories fail?
What is the impact of macro-economic factors like inflation, unemployment etc on forex exchange.?
A nicely formatted presentation.
What are the different types of forex market?
This presentation is a comprehensive presentation of Forex Market. It starts with the history of this market from Pre Gold period, Bretton wood till current floating exchange mechanism and in Indian perspective FERA and FEMA. It then gives you an idea on size, width and extent of this market and post that it covers forex exchange, quotes, and numerical. Finally, it covers few topics like Trade Finance, LIBOR, Balance of Payment & Currency Swaps
The aim of this presentation is to help build a better understanding of Forex trading and guide you through the necessary steps needed to become a responsible and successful trader in the foreign exchange market.
The ppt gives a description of how different theories define working of forex market. ?
when & where do these theories fail?
What is the impact of macro-economic factors like inflation, unemployment etc on forex exchange.?
A nicely formatted presentation.
What are the different types of forex market?
The Foreign Exchange (Forex) Market Explained: Dynamics, Participants and Tra...Steve W
This presentation provides an in-depth overview of the over-the-counter foreign exchange (Forex) market. Size, price discovery, major sources of liquidity, dealer transactions and trading strategy advancement and technology is discussed.
Foreign exchange market mechanism (FOREX) - International Business - Manu Mel...manumelwin
The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. The main participants in this market are the larger international banks.
The Foreign Exchange, also referred to as the "Forex" or "Spot FX" market, is the largest financial market in the world, with over $1.2 trillion changing hands every single day. This paper is about trading and managing risk in that fast moving market.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
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Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
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Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
2. 2
Lecture Outline
Describe the FX market
Identify participants and currencies
Understand spot and forward rates
Calculate & use cross and forward rates
Triangular arbitrage
Changes in exchange rates
3. 3
The foreign exchange market is the mechanism by
which participants:
– transfer purchasing power between countries;
– obtain or provide credit for international trade
transactions, and
– minimize exposure to the risks of exchange rate
changes.
Functions of FX Market
4. 4
Characteristics of FX Market
Largest of all financial markets with average daily
turnover of over $2 trillion!
66% of all foreign exchange transactions involve
cross-border counterparties.
Only ≈11% of daily spot transactions involve non-
financial customers.
London is the largest FX market.
US dollar involved in 87% of all transactions.
6. 6
Increasing Turnover
Daily foreign exchange market turnover in billions of US
dollars
(Bank for International Settlements Triennial Central Bank Survey 2004)
8. 8
A Spot transaction in the interbank market
is the purchase of foreign exchange, with
delivery and payment between banks to
take place, normally, on the second
following business day.
The date of settlement is referred to as the
value date.
Types of Transactions
9. 9
An outright forward transaction (usually called just
“forward”) requires delivery at a future value date of a
specified amount of one currency for a specified amount of
another currency.
The exchange rate is established at the time of the
agreement, but payment and delivery are not required until
maturity.
Forward exchange rates are usually quoted for value dates of
one, two, three, six and twelve months.
Buying Forward and Selling Forward describe the same
transaction (the only difference is the order in which
currencies are referenced.)
Types of Transactions
10. 10
A swap transaction in the interbank market is the
simultaneous purchase and sale of a given amount
of foreign exchange for two different value dates.
Both purchase and sale are conducted with the
same counterparty.
Some different types of swaps are:
– spot against forward,
– forward-forward,
– nondeliverable forwards (NDF).
Types of Transactions
12. 12
The foreign exchange market consists of two tiers:
– the interbank or wholesale market (multiples of $1M US or
equivalent in transaction size), and
– the client or retail market (specific, smaller amounts).
Five broad categories of participants operate within
these two tiers: bank and nonbank foreign exchange
dealers, individuals and firms, speculators and
arbitragers, central banks and treasuries, and foreign
exchange brokers.
Market Participants
13. 13
Banks and a few nonbank foreign exchange dealers
operate in both the interbank and client markets.
They profit from buying foreign exchange at a “bid”
price and reselling it at a slightly higher “offer” or
“ask” price.
Dealers in the foreign exchange department of large
international banks often function as “market makers.”
These dealers stand willing at all times to buy and sell
those currencies in which they specialize and thus
maintain an “inventory” position in those currencies.
Market Participants
14. 14
Individuals (such as tourists) and firms (such as
importers, exporters and MNEs) conduct commercial
and investment transactions in the foreign exchange
market.
Their use of the foreign exchange market is necessary
but nevertheless incidental to their underlying
commercial or investment purpose.
Some of the participants use the market to “hedge”
their foreign exchange risk.
Market Participants
15. 15
Speculators and arbitragers seek to profit from
trading in the market itself.
They operate in their own interest, without a need
or obligation to serve clients or ensure a
continuous market.
While dealers seek the bid/ask spread, speculators
seek all the profit from exchange rate changes and
arbitragers try to profit from simultaneous
exchange rate differences in different markets.
Market Participants
16. 16
Central banks and treasuries use the market to acquire or
spend their country’s foreign exchange reserves as well as
to influence the price at which their own currency is traded.
They may act to support the value of their own currency
because of policies adopted at the national level or because
of commitments entered into through membership in joint
agreements such as the European Monetary System.
The motive is not to earn a profit as such, but rather to
influence the foreign exchange value of their currency in a
manner that will benefit the interests of their citizens.
As willing loss takers, central banks and treasuries differ in
motive from all other market participants.
Market Participants
17. 17
Types of Activities
Speculation
An activity that leaves one open to exchange rate
fluctuations where one aims to make a profit.
Hedging
Allows the firm to transfer exchange rate risk inherent in
foreign currency transactions or positions.
Arbitrage – take advantage of inconsistent prices to
make risk-free profits. These profits are unlikely to last
long.
Spatial (or Locational) Arbitrage
Triangular Arbitrage
Covered Interest Arbitrage – Lecture 3
18. 18
Foreign Exchange Rates & Quotations
A foreign exchange rate is the price of one currency
expressed in terms of another currency.
A foreign exchange quotation (or quote) is a
statement of willingness to buy or sell at an
announced rate.
19. 19
Bid & Ask Quotes
Foreign currency dealers provide two quotes:
Bid Price: Price at which the dealer is willing to buy
foreign currency from you.
Ask Price: Price at which the dealer is willing to sell
foreign currency to you.
It is always the case that the Ask Price > Bid Price. The
difference is the Bid-Ask spread.
The less traded and more volatile a currency, the greater
is the spread.
20. 20
Direct & Indirect Quotes
Direct Quote: Home currency per unit of Foreign currency
(FC) - e.g. AUD/€ quote is 1.6003 – 1.6499
Indirect Quote: Foreign currency per unit of Home currency
- e.g. €/AUD quote of 0.6061 – 0.6249
Note that in all cases, the reciprocal of a direct quote is an
indirect quote:
Also, you might encounter an exchange rate quotation in
American terms (US$/FC) or European terms (FC/US$).
AUD
EUREUR
AUD 1
=
21. 21
Example
Bid Ask
$/£ 1.4482 1.4484
Bid: Dealer buys £ for $ at the Bid, Client
sells £ for $ (i.e., dealer will buy £1,000,000
for $1,448,200).
Ask: Dealer sells £ for $ at the Ask, Client
buys £ with $ (i.e., dealer will sell £1,000,000
for $1,448,400).
22. 22
Bid – Ask Spread
Banks act as market makers and realise their profits
from the spread:
Bid-Ask Spread = (Ask-Bid)/Ask
Consider the DIRECT quote of $ 1.4482 – 1.4484/£
( ) %38.1100
4484.1
4482.14484.1
% =×
−
=spread
23. 23
Forward Quotes
Forward rates can be quoted as either as an outright quote,
points or as an annualised % forward premium or discount.
24. 24
Forward Quotes – Points
A forward quotation expressed in points is not a foreign
exchange rate as such. It is the difference between the
forward rate and the spot rate.
When the Bid Points > Ask Points, you subtract the
points from the spot rate to get the outright forward
quote.
If the Bid Points < Ask Points, you add the points to
the spot rate to get the outright forward quote
25. 25
For quotations expressed in foreign currency
terms (Indirect quotations) the formula becomes:
f ¥
= Spot – Forward 360
For quotations expressed in home currency terms
(Direct quotations) the formula becomes:
f ¥
= Forward – Spot 360
100
nForward
xx
100
nSpot
xx
Forward Quotes – Percentage
26. 26
Cross Rates
Many currency pairs are inactively traded, so their exchange
rate is determined through their relationship to a widely
traded third currency.
For example, an Australian importer needs Danish currency
to pay for purchases in Copenhagen.
The Australian dollar (symbol A$) is not widely quoted
against the Danish kroner (symbol DKr).
However, both currencies are quoted against the U.S. dollar.
Assume the following quotes:
Australian dollar A$1.5431/US$
Danish kroner DKr7.0575/US$
27. 27
Cross Rates
The Australian importer can buy one U.S. dollar
for A$1.5431 and with that dollar buy
DKr7.0575. The cross-rate calculation would
be:
A$/DKr0.2186
US$DKr7.0575/
S$A$1.5431/U
dollar.kroner/U.SDanish
dollar.dollar/U.SAustralian
==
However, calculating cross-rates is usually
not as easy as this!
28. 28
Cross Rates – Example
We have the following rates:
US$1.4419 – 36 / GBP
US$0.6250 – 67 / CHF
Calculate the CHF / GBP rate!
= CHF 2.3008 – 98 / GBP.
29. 29
Cross Rates – Example
First: How do I get CHF/GBP from the two rates?
CHF/GBP = (US$/GBP)/(US$/CHF)
Second: Bid = go from bottom (GBP) to top (CHF) (use
GBP to buy US$, then US$ to buy CHF)
Third: Ask = go from top (CHF) to bottom (GBP) (use CHF
to buy US$, then US$ to buy GBP)
Fourth: Apply rule from part one to currency rate pairs.
Therefore, CHF 2.3008 – 98 / GBP.
30. 30
Cross Rates – Tips
As you do more cross rate questions you
will start to see patterns emerging.
For example if both rates are something
per USD or USD per something then you
will have to divide the rates somehow and
you will be matching bids with asks.
Or if the rates are in different forms (USD
is in different places) then you will be
multiplying and you will match bid with
bid and ask with ask.
31. 31
Triangular Arbitrage
Cross rates can be used to check on opportunities for
inter-market arbitrage. Suppose the following exchange
rates are available:
Bank of America: Dutch guilders (fl) per U.S. $ fl1.9025/U.S.$
Dominion Bank: Canadian dollars per U.S. $ C$1.2646/U.S.$
ABN Amro Bank: Dutch guilders per Canadian $ fl1.5214/C$
The synthetic cross rate between Dutch
guilders and Canadian dollars is:
/C$fl1.5044
S$C$1.2646/U
1.9025/US$fl
dollarS.dollars/U.Canadian
dollar.S.guilders/UDutch
==
You get more
guilders from
ABN Amro
32. 32
Triangular Arbitrage – Example
Divided by
1.9025 fl/US$
US$525,624
United States
Multiplied by
1.2646 C$/US$
C$664,704
Canada
Multiplied by
1.5214 fl/C$
(Start)(End)
Netherlands
fl1,000,000fl1,011,281
Profit = fl 11,281Profit = fl 11,281
33. 33
• Measuring a change in the foreign currency for
quotations expressed in home currency terms
(direct):
%∆ = Ending rate – Beginning Rate
• Quotations expressed in foreign currency terms
(indirect):
%∆ = Beginning Rate – Ending Rate
Beginning Rate x 100
Ending Rate x 100
Measuring a Change in the Spot Rate
34. 34
Example
The Australian dollar was quoted at A$1.8445/US$ on
Aug 19, 2002, while on March 2, 2004 it was quoted at
A$1.335/US$.
What is the appreciation/depreciation of the US$?
35. 35
Example
Thus, the appreciation/depreciation of the US$, relative
to the A$ from t-1 to t is:
1
1,
1
A$1.335/$ $1.8445
27.6%
$1.8445
t t
t t
t
S S A /$
R
S A /$
−
−
−
− −
= = = −
Thus, the U.S.$ has depreciated
relative to the A$ by 27.6%
36. 36
Example
To calculate the appreciation/depreciation of the
Australian dollar, relative to the US dollar, we want the
denominator currency to be the A$:
At t-1: A$1.8445/US$ = US$0.5422/A$
At t: A$1.335/US$ = US$0.7491/A$
1
1,
1
$0.7491 $0.5422/ $
38.2%
$0.5422/ $
t t
t t
t
S S A
R
S A
−
−
−
− −
= = =
Thus, the A$ has appreciated
relative to the US $ by 38.2%
37. 37
$ depreciation, A$ appreciation not equal
In general, the percentage appreciation in one currency
is not equal to the percentage depreciation in the other
currency. Instead…
1
________________________
1 + RA$ = (1 + RUS$)
Editor's Notes
Swap point/rate (also known as the FORWARD DIFFERENTIAL) – as is the convention with the “Financial Review” is the difference between the OUTRIGHT Forward rate and the spot rate.
C stronger than should be, DG weaker than should be.