...firm, Reliance Infrastructure (earlier, Reliance Energy), to pay just under Rs 125 crore as compounding fees for parking its foreign loan proceeds worth $300 million with its mutual fund in India for 315 days, and then repatriating the money abroad to a joint venture company. These actions, according to an RBI order, violated various provisions of the Foreign Exchange Management Act (FEMA). In its order, RBI said Reliance Energy raised a $360-million ECB on July 25, 2006, for investment in infrastructure projects in India. The ECB proceeds were drawn down on November 15, 2006, and temporarily parked overseas in liquid assets. On April 26, 2007, Reliance Energy repatriated the ECB proceeds worth $300 million to India while the balance remained abroad in liquid assets. It then invested these funds in Reliance Mutual Fund Growth Option and Reliance Floating Rate Fund Growth Option on April 26, 2007. On the following day, i.e., on April 27 2007, the entire money was withdrawn and invested in Reliance Fixed Horizon Fund III Annual Plan series V. On March 5, 2008, Reliance Energy repatriated $500 million (which included the ECB proceeds repatriated on April 26, 2007, and invested in capital market instruments) for investment in capital of an overseas joint venture called Gourock Ventures based in British Virgin Islands. RBI said, under FEMA guidelines issued in 2000, a borrower is required to keep ECB funds parked abroad till the actual requirement in India. Further, the central...
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...Table of Contents Capital Account Transactions Pages 03 to 08 FEMA Regulations – Capital Account Types of Capital A/c Transactions Foreign Institutional Investors Pages 09 to 11 Foreign Direct Investment Pages 12 to 15 American Depository Receipts Pages 16 to 17 Global Depository Receipts Pages 18 to 19 External Commercial Borrowings Pages 20 to 21 Foreign Currency Convertible Bonds Pages 22 to 25 Capital Account Convertibility Pages 26 to 28 Tarapore Committee and Current Status Pages 29 to 35 What is Capital Account Transaction? Capital account transaction is defined as a transaction which:- ➢ Alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India. In other words, it includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased). For example:- (i) a resident of India acquires an immovable property outside India or acquires shares of a foreign company. This way his/her overseas assets are increased; or (ii) a resident of India borrows from a non-resident through External commercial Borrowings (ECBs). This way he/she has created a liability outside India. ➢ Alters the assets or liabilities in India of person resident...
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...P. ASSIGNMENT: GUIDELINES FOR THE FX MARKET ANALYSIS & TRADING STRATEGIES REPORT Foreign Exchange Treasury Dealing Report Task You are a foreign exchange dealing team working for a large Vietnamese bank. Your team trades major Asian and world currencies (VND, AUD, SGD, JPY, USD, EURO, GBP and HKD) and has been asked by your senior manager to provide him with a report on the following: 1. An outline and explanation of the behaviour of the at least two currency pair (e.g. VND/USD, VND/EURO, and VND/AUD, USD/JPY, USD/EUR, etc.) over the past two years. 2. An outline and explanation of your market view concerning the behaviour of these exchange rates over the next three to six months. 3. An outline and explanation of what foreign exchange trading strategies you will undertake, to achieve maximum profits for your bank, as a consequence of your market view outlined in part 2. (You should include the bank’s role both as a price maker and as a possible speculator). 4. An outline and explanation of what risks and obstacles you might encounter in attempting to implement your strategies. Note that you should not use derivatives product only currency spot. CONTENT OF THE REPORTS The following structure and guidelines are provided to assist you in writing your reports. Executive summary or synopsis Your report must include an executive summary or synopsis. Introduction What is the name of your organisation? What is the objective of the report? What are the pairs of currency your team...
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...Foreign Exchange Market allows currencies to be exchanged to facilitate international trade and financial transactions. Evolution of the market in Bangladesh is closely linked with the exchange rate regime of the country. It had virtually no foreign exchange market up to 1993. bangladesh bank, as agent of the government, was the sole purveyor of foreign currency among users. It tried to equilibrate the demand for and supply of foreign exchange at an officially determined exchange rate, which, however, ceased to exist with introduction of current account convertibility. Immediately after liberation, the Bangladesh currency taka was pegged with pound sterling but was brought at par with the Indian rupee. Within a short time, the value of taka experienced a rapid decline against foreign currencies and in May 1975, it was substantially devalued. In 1976, Bangladesh adopted a regime of managed float, which continued up to August 1979, when a currency-weighted basket method of exchange rate was introduced. The exchange rate management policy was again replaced in 1983 by the trade-weighted basket method and US the dollar was chosen as intervention currency. By this time a secondary exchange market (SEM) was allowed to grow parallel to the official exchange rate. This gave rise to a kerb market. Up to 1990, multiple exchange rates were allowed under different names of export benefit schemes such as, Export Bonus Scheme, XPL, XPB, EFAS, IECS, and Home Remittances Scheme. This led to...
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...developments. The financial markets, including derivative markets, in India have been through a reform process over the last decade and a half, witnessed in its growth in terms of size, product profile, nature of participants and the development of market infrastructure across all segments - equity markets, debt markets and forex markets. Derivative markets worldwide have witnessed explosive growth in recent past. According to the BIS Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity as of April 2007 was released recently and the OTC derivatives segment, the average daily turnover of interest rate and non-traditional foreign exchange contracts increased by 71 per cent to US $ 2.1 trillion in April 2007 over April 2004, maintaining an annual compound growth of 20 per cent witnessed since 1995. Turnover of foreign exchange options and cross-currency swaps more than doubled to US $ 0.3 trillion per day, thus outpacing the growth in traditional instruments such as spot trades, forwards or plain foreign RBI Monthly Bulletin November 2007 * Keynote address delivered by Smt. Shyamala...
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...BRAC University Journal, vol. V, no. 2, 2008, pp. 81-91 FOREIGN EXCHANGE RISK MANAGEMENT PRACTICES - A STUDY IN INDIAN SCENARIO Sathya Swaroop Debasish Department of Business Management Fakir Mohan University Vyasa Vihar, Balasore - 756019 Orissa, INDIA ABSTRACT Indian economy in the post-liberalisation era has witnessed increasing awareness of the need for introduction of various risk management products to enable hedging against market risk in a cost effective way. This industry-wide, cross-sectional study concentrates on recent foreign exchange risk management practices and derivatives product usage by large non-banking Indian-based firms. The study is exploratory in nature and aims at an understanding the risk appetite and FERM (Foreign Exchange Risk Management) practices of Indian corporate enterprises. This study focusses on the activity of end-users of financial derivatives and is confined to 501 non-banking corporate enterprises. A combination of simple random and judgement sampling was used for selecting the corporate enterprises and the major statistical tools used were Correlation and Factor analysis. The study finds wide usage of derivative products for risk management and the prime reason of hedging is reduction in volatility of cash flows. VAR (Value-at-Risk) technique was found to be the preferred method of risk evaluation by maximum number of Indian corporate. Further, in terms of the external techniques for risk hedging, the preference...
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...FIN 403 Week 3 Learning Team Assignment Foreign Exchange and Derivatives Market Paper To Buy This material Click below link http://www.uoptutors.com/FIN-403/FIN-403-Week-3-Learning-Team-Assignment-Foreign-Exchange-and-Derivatives-Market-Paper FIN 403 Week 3 Learning Team Assignment Foreign Exchange and Derivatives Market Paper Resource: Investment Decision Selection Paper Prepare a 1,750-2,450-word paper. Analyze the impact of the foreign exchange and derivatives markets on your organization and countries in which the organization is considering expansion. Describe the impact of exchange rate convertibility, bid-ask spreads, real exchange rates, and the interest rate parity on the relative investment attractiveness of the countries in your scenario. Answer the following questions in your paper: Does purchasing power parity hold? What is its significance? What happened to the value of the real exchange rate over time? What is the significance of this change in value? What are bid-ask spreads for each currency? Include your calculations. What are implications of the absence or presence of a forward exchange market? Does interest rate parity hold? What is its significance? What international arbitrage opportunities exist in your organization? How may the organization take advantage of these for profit? Cite data sources you used for calculations. If you used an electronic source, include the URL. If you used a print source, attach a copy to your paper. Format your...
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...PREFACE During the last two decades, there has been a turmoil in the field of international money market resulting in various changes in the international subject of foreign exchange in a rather difficult one for it is highly technical and strictly governed by regulation which changes frequently. After a successful completion of internship program on Dhaka Bank, Khatungonj Branch over the topic of “Foreign Exchange Dealings”, I have attempted to produce a report over the mentioned topic. FOCUS OF THE REPORT This report highlights the theoretical as well as practical background of foreign exchange. As the DBL Ktg Branch deals with Import Business as well Export Business, this report will focus on import & export business mechanisms of foreign exchange. Initially this report will make a brief highlight on the overall Dhaka Bank Limited (DBL) & its Khatungonj (Ktg) Branch. Then it will discuss the basics of foreign exchange, means and methods for settlement of International trade, Import procedures, Details of documenting credit, exchange rate determination and financial statistics on foreign exchange business. In the end, the report will enclose an appendix, which will show the various financial results’ summary of the DBL Ktg Branch. I hope the report will achieve its ultimate objective. SAIDUL ALAM ACKNOWLEDGEMENT I have the pleasure to express my gratitude to the Almighty Allah (SWT) for giving me opportunity to complete my BBA course, internship Program...
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...Domestic Information Export Finance Reserve Bank of India Foreign Exchange Department Central Office, Mumbai RBI/2004-05/153 DBOD IECS No. 35/04.02.02/2004-05 Dated September 1, 2004 The Chairmen/Chief Executives of all Commercial Banks Dear Sir, Master Circular on EXPORT CREDIT IN FOREIGN CURRENCY As you are aware, in order to have all current instructions on a subject at one place, the Reserve Bank of India had issued a Master Circular IECD No. 7/04.02.02/2002-03 dated July 1, 2003 on the captioned subject, which is now updated as on 1st July, 2004. A copy of the revised Master Circular is enclosed. It may be noted that the Master Circular consolidates and updates all the instructions contained in the circulars listed in the Appendix, in so far they relate to providing export credit in foreign currency by banks to the borrowers. Yours faithfully, Sd/(A. SREEKUMARAN) General Manager Encls. : As above (Details of the Master Circular given below) Master Circular EXPORT CREDIT IN FOREIGN CURRENCY CONTENTS 1. Pre-Shipment Export Credit 1.1 Pre-shipment Credit in Foreign Currency (PCFC) 1.1.1 Definition 1.1.2 General 1.1.3 Scheme 1.1.4 Source of Funds for Banks 1.1.5 Spread 1.1.6 Period of Credit 1.1.7 Disbursement of PCFC 1.1.8 Liquidation of PCFC Account 1.1.9 Cancellation/Non-execution of Export Order 1.1.10 Running Account Facility for All Commodities 1.1.11 Forward Contracts 1.1.12 Sharing of EPC under PCFC 1.1.13 Supplies from One EOU/EPZ/SEZ Unit to Another EOU/EPZ/SEZ...
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...[pic] CHAPTER – I GRAND PROJECT ON CURRENCY DERIVATIVES NANCY SHAH – PROJECT TRAINEE CHAPTER 2 INTRODUCTION TO CURRENCY MARKETS 2.1 BASIC FOREIGN EXCHANGE DEFINITIONS Spot: Foreign exchange spot trading is buying one currency with a different currency for immediate delivery. The standard settlement convention for Foreign Exchange Spot trades is T+2 days, i.e., two business days from the date of trade. Forward Outright: A foreign exchange forward is a contract between two counterparties to exchange one currency for another on any day after spot. In this transaction, money does not actually change hands until some agreed upon future date. The duration of the trade can be a few days, months or years. For most major currencies, three business days or more after deal date would constitute a forward transaction Base Currency / Terms Currency: In foreign exchange markets, the base currency is the first currency in a currency pair. The second currency is called as the terms currency. Exchange rates are quoted in per unit of the base currency. E.g. The expression US Dollar–Rupee, tells you that the US Dollar is being quoted in terms of the Rupee. The US Dollar is the base currency and the Rupee is the terms currency. Exchange rates are constantly changing, which means that the value of one currency in terms of the other is constantly in flux. Changes in rates are expressed as strengthening or weakening of one currency vis-à-vis the other currency...
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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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...on the pretext of market failure arising from externalities, decreasing cost industries, and equity considerations for maximising social welfare. In Pakistan, where the private sector has played a dominant role, except probably for the 1970s,1 private sector activities have all along been regulated through various types of controls and regulations on entry and exit, prices, credit, foreign exchange, imports, investments, etc. These regulations were imposed with a view to ensuring that private sector allocations were in accordance with the national priorities [see Pakistan (1983-84)]. However, the objectives were rarely realised and, in fact, these regulations have been responsible for red-tapism and corruption. On the grounds of government failure, privatisation and deregulation policies are being practised almost everywhere in the hope that they would help in efficient allocation of resources and higher levels of productivity. Considerable regulatory reforms have also been effected in Pakistan over the last two decades. Investment and import licensing have been withdrawn, most of the foreign exchange restrictions have been removed, capital market regulations have been simplified, price controls have been lifted, and interest rates have been deregulated. However, there is considerable room for further regulatory reforms. Similarly, various public enterprises in the manufacturing and financial sectors have been privatised, telecommunication, airlines, and energy firms have been partially...
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...Introduction The term “foreign exchange” basically refers to buying the currency of one country while selling the currency of another country. All nations have their own, different kinds of money (currency). This has existed throughout the ages, probably since the time of the Babylonians. As trading developed between nations, the need to convert one kind of money to another also developed. This is how a formal system of foreign exchange arose. As trade between nations developed, Britain, as the nation with the largest and strongest navy, could spread its commercial interests far and wide. It therefore became the most active trading nation, with a vast empire of colonies. As a result, Britain’s currency, the pound sterling, became a benchmark to which other currencies were compared (and exchanged) for most of the seventeenth, eighteenth and nineteenth centuries. Today, most currencies are compared to the U.S. Dollar, currently the most active and commercially strong trading nation; many currencies are still “pegged” to the U.S. Dollar for their exchange rate. Because FX risks can be identified, they can be managed. Foreign exchange management requires that governments, companies, and individuals understand the factors that influence the valuation of currency. By identifying these factors, they can enter into transactions that mitigate the risks to acceptable levels. These transactions, or hedge positions, are designed to maximize the economic benefit of foreign exchange receipts, and...
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...sector includes those institutions which are regulated otherwise but do not fall under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange Commission or any other enacted financial regulator. This sector is mainly represented by Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non Governmental Organizations (NGOsand discrete government programs. The informal sector includes private intermediaries which are completely unregulated. [pic] The financial market in Bangladesh is mainly of following types: Money Market: The primary money market is comprised of banks, FIs and primary dealers as intermediaries and savings & lending instruments, treasury bills as instruments. There are currently 15 primary dealers (12 banks and 3 FIs) in Bangladesh. The only active secondary market is overnight call money market which is participated by the scheduled banks and FIs. The money market in Bangladesh is regulated by Bangladesh Bank (BB), the Central Bank of Bangladesh. Capital market: The primary segment of capital market is operated through private and public offering of equity and bond instruments. The secondary segment of capital market is institutionalized by two (02) stock exchanges-Dhaka Stock Exchange and...
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...part of the foreign exchange risk in doing international business. Future payments or distributions that are payable in foreign currency carry the risk that the foreign currency will depreciate in value before the foreign currency payment is received and is exchanged into US dollars. (Kelley, 2001) Billabong relied solely on the foreign exchange market. US had 50 percent of the company’s annual sales. When the US dollar gets stronger against the Australian dollar, their product becomes less expensive in the US. When the Australian dollar dropped $0.60 Australian/ $1 US “the Billabong’s products become less expensive in US dollars, and this drives sales forward”. (Hill, 2015, p. 319) Due to the anxiety many institutions sold Australian dollars, which ultimately drove down their value on foreign exchange markets. From the sales the US dollars were exchanged back into Australian dollars, the US dollar value increased “as the Australian dollar fell”. (Hill, 2015, p 319) When the Australian dollars lower, it makes exports more affordable to oversea buyers. In essence the low value of Australian dollar equals sales driving forward. 2. Could the rise in the value of the Australian dollar that occurred in 2009 have been predicted? As stated in the text (Hill, 2015) “what happens in the foreign exchange market can have a fundamental impact on the sales, profits, and strategy of an enterprise”. It is a key criterion for managers to understand the foreign exchange market, and...
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