Professional Documents
Culture Documents
Exchange Market
Abdullah Omari
Arafat Serhan
Zerina Jusofovic
The Foreign Exchange Market
• The Foreign Exchange Market provides:
– The physical and institutional structure
through which the money of one country is
exchanged for that of another country
– The determination rate of exchange between
currencies
– Is where foreign exchange transactions are
physically completed
The Foreign Exchange Market
• Foreign exchange means the money of a
foreign country; that is, foreign currency bank
balances, banknotes, checks and drafts.
• A foreign exchange transaction is an
agreement between a buyer and a seller that
a fixed amount of one currency will be
delivered for some other currency at a
specified date.
Geography
• The foreign exchange market spans the
globe, with prices moving and currencies
trading somewhere every hour of every
business day.
• As the next exhibit will illustrate, the volume
of currency transactions ebbs and flows
across the globe as the major currency
trading centers open and close throughout
the day.
Measuring Foreign Exchange Market Activity:
Average Electronic Conversations Per Hour
25,000
20,000
15,000
10,000
5,000
Greenwich Mean
Time
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
800
700 Spot
Forwards
600 Swaps
500
400
300
200
100
0
1989 1992 1995 1998 2001
Source: Bank for International Settlements, “Central Bank Survey of Foreign Exchange and Derivatives
Market Activity in April 2001,” October 2001, www.bis.org.
Geographic Distribution of Foreign
Exchange Market Turnover (daily averages in April,
billions of US dollars)
700 United States
United Kingdom
600
Japan
500 Singapore
Germany
400
300
200
100
0
1989 1992 1995 1998 2001
Source: Bank for International Settlements, “Central Bank Survey of Foreign Exchange and Derivatives
Market Activity in April 2001,” October 2001, www.bis.org.
Foreign Exchange Rates
and 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.
Foreign Exchange Rates
and Quotations
• Most foreign exchange transactions involve the
US dollar.
• Professional dealers and brokers may state
foreign exchange quotations in one of two ways:
– The foreign currency price of one dollar
– The dollar price of a unit of foreign currency
• Most foreign currencies in the world are stated in
terms of the number of units of foreign currency
needed to buy one dollar.
Foreign Exchange Rates
and Quotations
• For example, the exchange rate between US
dollars and the Swiss franc is normally stated:
– SF 1.6000/$ (European terms)