国际金融英文版ch3.ppt

Chapter 3 Foreign Exchange Market and Foreign Exchange Rate Foreign Exchange Market Foreign exchange is another country’s money. The dynamic meaning of the foreign exchange refers to the act of trading different country’s currencies. Convertibility means a currency can be freely exchanged for another currency. This is the most important characteristic of the foreign exchange. Measuring foreign exchange market activity: Average electronic conversions per hour Global foreign exchange market turnover, 1998 -2010 (daily averages in April, billions of U.S. dollar) Top 10 geographic trading center in the foreign exchange market, 1992-2007 (daily averages in April, billions of $) Participants in the foreign exchange market Retail customers are made up of individuals, international investors, small businesses, speculators or the like who need foreign exchange. Commercial banks (market dealers) carry out buy/sell orders from their retail clients and buy/sell currencies on their own account. Spot Exchange Market and Exchange Rate Quotations The spot exchange market is a market that deals in foreign exchange for immediate delivery. Immediate delivery in foreign currencies usually means within two business days. A spot exchange rate is the current market price, the rate at which a foreign exchange dealer converts one currency into another currency on a particular day. Foreign exchange rate quotations on the U.S. Dollar/British Pound in the Financial Press Foreign exchange cross rates at close of business, 4 January 2005 The Value of a Currency When a currency gains value relative to another, the currency appreciates. Otherwise, it depreciates. In foreign exchange market, if the demand for dollar is more than the supply of the dollar, the dollar appreciates. Percentage change in foreign currency value: (Ending rate – Beginning rate) (Beginning rate) Foreign Exchange Arbitrage Arbitrage means a profitable position obtained with