Unit 2.1 FOREX Market
Unit 2.1 FOREX Market
Unit 2.1 FOREX Market
➢ The Spread between buy and sell in retail market will be high
➢ The spread between buy and sell in wholesale market will be less
Buy INR -----------> Sell USD (1 USD = 65.85 INR) – 1st January 2023
5th January 2023 1 USD = 66.05 INR).
When he acquires the USD he has to bear the loss of INR 200,000 for a
USD 1 Million transaction.
Speculators
➢ When the primary makers do not cover their positions and
leave to the market movement.
If Paris bank “made the market” means London bank “called for a quote” then the
settlement date is Wednesday.
If Paris bank “called for a quote” means London bank “made the market” then the
settlement date is Thursday
Example
1 month (30 days) forward purchase of GBP against INR made in June 20
Indirect Quote
1 unit of Local CCY is equivalent to X unit of FCY
80 INR = 1 USD
The first currency is the “Base currency”. USD is base currency and Swiss franc and
Indian rupee are quoted currency. USD/INR quotation will be given as amount of
rupee per USD.
E.g. 2 RIL has purchased machinery worth US$5,00,000 from the US which is
payable in 3 months time. RIL expects that the frame will weaken over a period. He
has asked his banker for forward exchange cover. The rates existing at the time are:
E.g.4
B Ltd, has shipped goods to an USA importer for $ 10000 due in 90 days.
Today Spot Rate $ 1 = Rs.45 If Rs. will depreciate by 10% in 90 days, calculate gain or
loss due to foreign exchange fluctuation.