fx ppt 19-10-11
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Presented by:- ROLL NO.Birendra kumar 10Hardik Kothari 21
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EXCHANGE RATEMECHANISM
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The rate at which one currency can be exchanged for
another currency.
In other words it is value of one currency in terms ofother.
say:US $ 1 = Rs.48.88
What Does Exchange
Rate Mean
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Foreign Exchange Market Process
Settlement /
Delivery
Deal /
Contract
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Types of Transaction: Value Date Concept
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Due to vastness of the market and origin of transactions,
settlements may take place at different time zones, most of
times deal dates and settlement date differs.
Type of TXN Date of Deal Value Date
Cash/Ready 12.09.2011
Monday
12.09.2011
Monday
TOM
12.09.2011
Monday
13.09.2011
Tuesday
Spot 12.09.2011
Monday
14.09.2011
Wednesday
Forward
12.09.2011
Monday
Any day after
14.09.2011
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Value date
Value date means the date on which the deal will besettled.
Also known as delivery date when the currency is to
be delivered by one party to another.
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Forward Contract?
A Forward Exchange Contract is an agreement between twobanks or between a bank and a customer to exchange one
currency for another at some future date.
FORWARD RATES:
Forward rates are derived from Spot rates.
Forward rate is the spot rate adjusted for the premium /discount.
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If the future price (forward) is higher than Spot rate, then it is
said to be at a premium.
If the future price is lower than Spot rate, then it is at a
discount.
e.g. Spot (14.09.2011) Forward (14.10.2011)
USD/INR 1 $= Rs.48.44 /46 1 $= Rs.48.94/96 ( Premium)
USD is dearer and at Premium.
INR is at Discount against USD
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Methods of Quotation
Method - I
DIRECT(FC fixed)
USD 1 = Rs 48.88GBP 1 = Rs.85.99
EUR 1 = Rs 57.92
Method - II
INDIRECT( LC fixed)
Rs 100 = USD 2.0458Rs 100 = GBP 1.1629
Rs 100 = EUR 1.7265
With Effect from 02.08.1993, all exchanges are quoted in Direct Method
Indirect QuotationThe Foreign Currencies are
expressed in terms of the
local currency.
Direct QuotationThe Quotation in which the
local currency is expressed in
terms of Foreign Currencies
(USD,EUR,GBP,JPY,AUD,NZD).
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Cross Rate
The rate at which two currencies exchange, based on
exchange rates using a third currency.
For example, the cross rate of EURO for JPY might be based
on the rate of EURO for USD and USD for JPY.
Cross rates usually do not involve the U.S. dollar.
India is a market maker for INR.
But what about other currencies?
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Where do rates for CHF, GBP, EUR,CAD,JPY, etc. come from?How are they calculated?
Computation of CHF / INR Rate:-
A CHF/INR rate is a cross of USD/INR & USD/CHF.
USD/INR = Rs. 45.16/18
USD/CHF= $1.2570/73
CHF 1 = Rs. 56.7796 (buying)
Rs. 56.7912 (selling)
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