Schapterforeignexchangemarket.ppt

FX Market Session 1 D CHAPTER 3 The Foreign Exchange Market 主要外汇行情网站 Fed raises rates again Foreign Exchange Markets Topics Foreign Exchange and Foreign Exchange Rate Major functions of the foreign exchange markets Exchange rates: Definition Cross rates The relationship between spot rate and forward rates Chapter Outline Function and Structure of the FOREX Market The Spot Market Demand and supply for foreign exchange The Forward Market Foreign Exchange and Exchange rate Foreign Exchange 1. it is the act of trading different nations money 2. bank deposits denominated in the foreign currency 3. typically, bank deposits denominated in U S dollars Each country has a currency in which the prices of goods and services are quoted An exchange rate is the price of one currency in terms of another. This is sometimes called the nominal exchange rate Exchange Rate Quoting An exchange rate can be quoted in two ways Direct (American) terms and indirect (European) terms In this course we will always (unless otherwise stated) quote the exchange rate in direct terms Direct Terms Price of foreign currency in terms of national currency How many units of national currency do we need to buy a unit of foreign currency Example $/€, $/￥ Today’s dollar-euro exchange rate is $1.27384 per euro Indirect Terms Price of national currency in terms of foreign currency How many units of foreign currency do we need to buy a unit of national currency Example €/$, ￥/$ Today’s euro-dollar exchange rate is €0.931015 per USD Appreciation and Depreciation of a Currency A depreciation of the dollar against the euro means that the price of a euro in terms of dollars has gone up An appreciation of the dollar against the euro means that the price of a euro in terms of dollars has gone down Appreciation and Depreciation of a Currency If the dollar depreciates against the euro this must mean that the euro has appreciated against the dollar If the dollar appreciates against the euro this m