...limitations of this system of trade paved the path for the introduction of ‘Money’and Money gave birth to the need to exchange different currency:- Foreign Currency trading. The origin of Foreign Exchange (Forex) trading traces its history to centuries ago. The Babylonians are credited with the first use of paper notes and receipts. However, during this phase of history Speculation hardly ever happened. During the middle ages, the introduction of a paper form of governmental I.O.U. gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion.These paper bills represented transferable third-party payments of funds, making foreign currency exchange trading much easier for merchants and traders and causing these regional economies to flourish. These I.O.U’s have now become the basis of today's modern currencies. From its infantile stages during the Middle Ages to First World war, the forex markets were relatively stable and without much speculative activity. During this phase, most Central banks supported their currencies with convertibility to gold. This standard had a major weakness called the ‘boom-bust’ pattern. As an economy strengthened (Boom), it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession (Burst). Ultimately, prices of commodities had...
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...2 3 4 5 6 7 8 9 10 11 12 13 Title INTRODUCTION HISTORY OF FOREIGN EXCHANGE MARKETS MARKET SIZE AND LIQUIDITY MARKET PARTICIPANTS KINDS OF FX TRANSACTIONS COMPONENTS OF FX TRADING EXCHANGE RATES AND ITS USES GLOBAL LINKAGE OF FOREIGN EXCHANGE MARKETS FACTORS THAT AFFECT FOREIGN EXCHANGE MARKET TRENDS DIFFERENT EXCHANGE SYSTEMS WHICH LINKS THE FOREX MARKET GLOBALLY BASIS OF COMMUNICATION FOR INTERNATIONAL TRANSFERS CONCLUSION BIBLOGRAPHY Page no. 7 9 11 12 14 16 22 25 35 37 39 40 42 5 GLOBAL LINKAGE OF FOREIGN EXCHANGE MARKETS 6 Introduction The foreign exchange market is the biggest financial market in the world. Every day, transactions worth about 3.98 trillion dollars are carried out within the market. The major aim of introducing the foreign exchange market is to facilitate international trade by enabling businesses to perform transactions outside their local currency. The market operates round the clock from Monday through Friday. Foreign Exchange is the simultaneous Buying of one currency and paying for it with another at an agreed price (exchange rate) for settlement on an agreed date. FOREX is an acronym for FOReign Exchange. In the foreign exchange market today, a trader can purchase some amount of international currencies by paying with a different currency. This type of foreign exchange market started to develop in the 1970s, which was about thirty years after foreign exchange was introduced. Some important features about the FX market include the...
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...Volatile Exchange In the Global Market Discuss and explain the functions of the foreign exchange market. The role of the foreign exchange market in international business and how it impacts a country's ability to do business is simple: It keeps the money flowing around the world. The foreign exchange (FOREX) market provides a place for nations to purchase, borrow, or sell their own currency to members of other nations. What the FOREX do in this regard is provide the resources for countries to make payments and transfer funds across borders, and provides purchasing power from one currency to another. These provisions make valuations of currency available to determine one of the greatest functions of the FOREX, the exchange rate. (Hill, 2011) The exchange rate is a price determined by the number of units of one nation's currency that must be surrendered in order to acquire one unit of another nation's currency. The exchange rate between two currencies is dependent upon official or private participants to buy and sell its currency to maintain an authorized pegged rate. The exchange rates in FOREX are set then by the market and not by governments. Even with these determinations, the biggest player in defining the exchange rates rely on supply and demand of American goods and currency. International business relies directly on the functionality of the FOREX. In addition to international business, citizens traveling to foreign nations have to rely on a standard in which...
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... Foreign Exchange Market with Hedging Instruments In partial fulfillment of the requirements of for award of Master of Management Studies Through Atharva Institute of Management Studies under the guidance of Prof. Aditi Mahajan Submitted by Paras Gada MMS Batch: 2010 – 2012. DECLARATION I, Mr. Paras Gada of Atharva Institute of Management Studies pursuing Masters of Management Studies hereby declares that I have completed this project on “Foreign Exchange Market with Hedging Instruments” for the Academic period 2010 – 12. The Project has not formed the basis for award of any other degree, associates, fellowship or any other similar titles. This information submitted is true and original to the best of my knowledge. Place: Mumbai Date: 3rd April, 2012 Signature of the Student ACKNOWLEDGEMENT The present work is an effort to throw some light on ‘Foreign Exchange market with Hedging Instrument’ the work would not have been possible to come to the present shape without the able guidance, supervision and help to me by number of people. With deep sense of gratitude I acknowledged the encouragement and guidance received by Prof Aditi Mahajan, for completion of my project report. CERTIFICATE This is to certify that Mr. Paras Gada, a student of Atharva Institute of Management Studies, of MMS SEM IV bearing Roll No. 12 and specializing in Finance has successfully completed the project titled “To study Foreign Exchange market with...
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...INTRODUCTION: FOREX — the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world. Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates. In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time. Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For example, INR/USD is the price of the Indian rupees expressed in US dollars, as in Rs 1 = 0.0015 $. Foreign exchange reserves usually stores foreign currency and bonds held by the central banks of nations...
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...RESEARCH includes research articles that focus on the analysis and resolution of managerial and academic issues based on analytical and empirical or case research Interaction Between Forex and Stock Markets in India: An Entropy Approach Y V Reddy and A Sebastin Executive Summary Interactions between the foreign exchange market and the stock market of a country are considered to be an important internal force of the markets in a financially liberalized environment. If causal relationship from a market to the other is not detected, then informational efficiency exists in the other whereas existence of causality implies that hedging of exposure to one market by taking position in the other market will be effective. The temporal relationship between the forex market and the stock market of developing and developed countries has been studied, especially after the East Asian financial crisis of 1997–98, using various methods like cross-correlation, cross-spectrum, and error correction model, but these methods identify only linear relations. A statistically rigorous approach to the detection of interdependence, including non-linear dynamic relationships, between time series is provided by tools defined using the information theoretic concept of entropy. Entropy is the amount of disorder in the system and also is the amount of information needed to predict the next measurement with a certain precision. The mutual information between two random variables X and Y with a joint...
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...BACKGROUNDS 4 1. Definition of Foreign Exchange (FOREX) 4 2. Features of Foreign Exchange (FOREX) 5 3. Forex categories: 5 4. Main participants in the foreign exchange market 6 4.1. Foreign exchange dealers 6 4.2. Financial and non-financial customers 7 4.3. Central banks 7 4.4. Brokers 8 4.4.1. In the Over-the-Counter Market 8 4.4.2. Voice Brokers 8 4.4.3. Automated Order-Matching or Electronic Broking Systems 8 4.4.4. In the Exchange-Traded Market 9 CHAPTER II: Situation of currency market in Vietnam 9 1.Roles of the SBV in controlling the currency market 9 2. Some basic features about the currency market in Vietnam from 1991 to 2011 12 2.1. The currency inter-bank market in Vietnam 12 2.1.1. The introduction of currency inter-bank market in Vietnam 12 2.1.2. The role of inter-bank transactions 14 2.1.3 The organization and operation of the currency market in Vietnam 15 2. Transactions in the parallel market and dollarization in Vietnam 15 2.1. Transactions in the parallel in Vietnam 15 2.2. Dollarization in Vietnam 16 3. Some description about the derivatives in Vietnam’s currency market 17 3.1. The introduction of derivatives in Vietnam 17 3.2. Changes of exchange rate. 19 CHAPTER III: SOLUTIONS 23 1. Shut down the black market 23 2. Implement a semi-peg system 23 3. Resort to forex surrender 24 4. Increase the...
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...need for foreign exchange market, foreign exchange rates or foreign exchange. But in a world of many national currencies, the foreign exchange market plays the crucial role of providing the requisite machinery for making payments across borders, transferring funds and purchasing power from one currency to another, and determining the exchange rate. The fundamental changes in foreign exchange, or FX, market began to take form in 1970′s along with the increasing internationalization of financial transactions and the change of many economies into floating exchange rate system from fixed rate system. Over years, these changes have transformed the foreign exchange market into the world’s biggest and most dynamic market today. The daily turnover of global FX market currently amounts to many trillions of dollars. The objective behind this entire project is to get the basic understanding about an Indian foreign exchange market, Forex Instruments available in India, its functioning, Forexregulators& players. Project has emphasis more on numerical data gathered through different reliable sources to comparing and analysis the performance so far by Indian foreign market with other countries and their currencies which holds a dominant position in the global foreign exchange market. As in the rest of the world, in India too, foreign exchange market is the largest financial market in existence. The phenomenon that has dramatically changed India’s foreign exchange market was liberalization...
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...Best Buy enters India by Francisco Polo Professor Hamid Assar International Finance – FIN535 May 22, 2012 Summary Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Puerto Rico, Mexico, Canada and China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates under both the Best Buy and Future Shop label. Together these operate more than 1,150 stores domestically and internationally. In addition, the company operates over 100 Best Buy Express Automated Retail stores or "ZoomShops", operated by Zoom Systems, in airports and malls around the U.S. The company is headquartered in Richfield, Minnesota, United States. On March 9, 2009, Best Buy became the largest electronics retail store (online and bricks and mortar) in the eastern United States, after smaller rival Circuit City went out of business. Fry's Electronics remains a major competitor in the western United States, while Hhgregg remains competitive in the eastern United States. Many locations feature in-store pickup, which can be arranged through the company's website. As of December 28, 2008, the company operated 1,010 Best Buy Stores, 13 Magnolia Audio Video Stores (specializing in high-end electronics), 7 stand-alone Geek Squad stores, 3 Audio Visions Stores, 13 Best Buy Mobile Stores (standalone) and...
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...Table of Contents Introduction 2 Factors affecting exchange rate 4 Is an appreciation good or bad? 8 Reasons for Currency Appreciation in Pakistan 8 Impact of Pak rupee appreciation on Economy of Pakistan 9 Impact on Sectors 13 Conclusion/ Recommendations 14 References 15 Introduction Exchange rate can be defined as rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another (such as for the purposes of travel to another country), or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates,inflation, and the state of politics and the economy in each country also called rate of exchange or foreign exchange rate or currency exchange rate. An increase in the value of one currency in terms of another. Currencies appreciate against each other for various reasons, including capital inflows and the state of a country's current account. Typically a forex trader trades a currency pair in the hopes of currency appreciation of the base currency against the counter currency. The dollar has depreciated significantly against the rupee. As this has been a highly noticeable and largely unexpected event, it has raised a plethora of questions in the minds of citizens, and conspiracy theories have done the rounds. Yet dollar depreciation against the rupee is not as mysterious...
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...INDIAN INSTITUTE OF PLANNING AND MANAGEMENT BANGALORE FINANCIAL MANAGEMENT PROJECT REPORT ON STUDY OF FOREX MARKET IN INDIA AND COMAPARATIVE STUDY OF FUNDAMENTAL ANALYSIS AND TECHNICAL ANALYSIS WITH RESPECT TO HARVEST FUTURES CONSULTANTS INDIA Pvt Ltd. Submitted in partial fulfillment of requirements for the degree of Masters of Business Administration (2010-2012) affiliated to IIPM, BANGALORE Under the guidance of Prof. ZAKARIA SUBMITTED BY ABHISHEK JAIN – F10A165, DINESH REDDY F V – F09BB05, B G HARI NATH REDDY- F10A157, HARISH NAGARAJ – F10A106, RISHI KUMAR BHARGAVA – F10A134, VENKATA SWARUP KUMAR – F10A110. CERTIFICATE FROM THE GUIDE This is to certify that the project work titled “STUDY ON FOREX MARKET IN INDIA & COMPARATIVE STUDY OF FUNDAMENTAL ANALYSIS AND TECHNICAL ANALYSIS WITH RELEVANCE TO FOREX MARKET WITH RESPECT TO HARVEST FUTURES CONSULTANTS INDIA Pvt Ltd”, is a bonafide work of ABHISHEK JAIN, DINESH REDDY, HARI NATH REDDY, HARISH NAGARAJ, RISHI KUMAR BHARGAVA, VENKATA SWARUP KUMAR carried the partial fulfillment for the award of degree MASTER OF BUSINESS ADMINISTRATION of INDIAN INSTITUTE OF PLANNING & MANAGEMENT under my guidance. This project work is original and not submitted earlier for the award of any degree of any other University/Institution. Signature of Guide Name of the guide ZAKARIA, IIPM ACKNOWLEDGEMENT We would like to express our profound gratitude to all those who have been instrumental in the preparation of this project report...
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... 19-1: d. Direct exchange rate: December 1 1 ÷ 2.22 yen = P 0.45 December 31 1 ÷ 2.70 yen = 0.37 Decrease in forex rate P 0.08 Forex gain (200,000 yen x P0.08) P16,000 19-2: c. Forex rate, December 1 P 0.45 Forex rate, December 31 0.47 Increase in forex rate P 0.02 Forex gain (1,500,000 yen x P0.02) P 30,000 19-3: d. September 30: Forex rate, September 1 P 5.61 Forex rate, September 30 5.59 Decrease in forex rate P 0.02 Forex gain (200,000 hkg.$ x P0.02) P 4,000 December 31: Forex rate, October 1 P 5.59 Forex rate, December 30 5.62 Increase in forex rate P 0.03 Forex loss (200,000 hkg.$ x P0.03) P(6,000) 19-4: b. Forex loss on importation of merchandise: Peso equivalent, January 10, 2004 P 600,000 Peso equivalent, April 20, 2004 608,000 Forex loss (increase) P (8,000) Forex loss on notes payable: Peso equivalent, September 1, 2004 P 3,000,000 Peso equivalent, December 31, 2004 3,200,000 Forex loss on principal P (200,000) Add: Forex loss on interest Based on P 3,2000,000 P 120,000 Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000 Forex loss P (220,000) Total forex loss (P 8,000 + P220,000) P (228,000) 19-5: a. Direct forex rate – Transaction date (P...
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...foreign exchange market does not have a physical market place called the foreign exchange market. It is a mechanism through which one country's currency can be exchange i.e. bought or sold for the currency of another country. The foreign exchange market does not have any geographic location. The market comprises of all foreign exchange traders who are connected to each other through out the world. They deal with each other through telephones, telexes and electronic systems. The foreign exchange market operates twenty four hours a day during the business week; the only time it is silent is after the New York market closes on Friday afternoon and before the Sydney market opens on Monday morning (which would be Sunday evening New York time). In the aftermath of the Asian crisis, which curbed and restricted offshore trading in regional currencies, most derivatives markets in Asia are still in their infancy. Financial institutions trying to introduce or transplant products from mature markets to those that are lesser developed are meeting with limited success. The RBI has ushered rupee derivatives trading into the country: it has formally allowed banks and corporate to hedge against interest rate risks through the use of interest rate swaps (IRS) and forward rate agreement (FRA). According to the guidelines issued by RBI there will be no restriction on the tenure and size of the IRS and FRA entered into by banks. The IRS will also allow corporate to hedge their interest rate risks...
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...foreign exchange rates. In the case of Australia, what industries are vulnerable when the foreign exchange rate is high? Explain your answer fully. An exchange rate is the measure of value of one currency against another currency; for example, AUD $1 = USD $1.03 (indirect quotation). Exchange rates are dynamic in that they are changing throughout every trading day. Basically, fluctuation is caused by demand and supply of the currency. As in any market, price rises with shortages of supply and increases in demand. Price falls with reduced demand and increased supply. Figure 1.1 Demand curve The demand curve for Australian currency shows the quantity of Australian Dollar (AUD) that buyers are willing to purchase at each possible exchange rate. Demand arises from several sources * Exports – Foreigners who wish to buy Australian goods and services * Foreign tourists and international students in Australia * Australians firms borrowing abroad * Foreigners investing in Australia (capital inflow, e.g. assets, dividends etc) * Current transfers into Australia * Speculators who expect the value of AUD to rise The curve is downward sloping (Figure 1.1 – blue) since it is reasonable to expect that the cheaper the price of the local currency, the greater would be the demand for the currency by the rest of the world. Supply Curve (red) Supply curve for Australian currency shows the quantity of AUD supplied by Australian citizens at each possible exchange rate. Supply...
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...The Foreign Exchange Market Before the times of the foreign exchange market, the world depended on the gold standard to determine the value of goods and services. This paper will describe in more detail the gold standard, the positive and negative aspects of using the gold standard and in addition the paper will summarize the major functions of the world’s major foreign exchange markets. The gold standard was a monetary system that many countries used in order to determine the value of domestic currencies in relation to a specific amount of gold. The value of money, bank deposit and notes were transformed into gold at the specific amount. Britain was the first country to adopt the gold standard in 1816, followed by the United States. From 1834 until 1933 the specified price of gold in the United States was $20.67 per ounce (Bordo, 2002). However, in 1933 U.S. President Franklin D. Roosevelt put an end to the gold standard when he prohibited the possession of gold by any persons except for the purposes of owning or manufacturing jewelry (Moffatt, 2008). This was the beginning of the Bretton Woods System. Under the Bretton Woods System, countries agreed to settle their international balances by converting deficits into U.S. dollars at a flat exchange rate of $35 per ounce (Bordo, 2002). This monetary system only lasted until 1971 when President Richard Nixon completely ended the trading of gold (Moffatt, 2008). Since that time the gold standard has not been used by any major...
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