Abhishek BMA WC
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A premier financial services organization providing individual and corporates with customized financial solutions. It has corporate membership in National Stock Exchange Ltd, Bombay Stock Exchange Ltd. and Central Depositories Securities Ltd. It also has corporate membership in commodities exchange of NCDEX and MCX. It is also is SEBI approved AMFI registered Mutual Fund advisory and intermediary. The document then discusses the US dollar as the world's largest currency market and reserve currency, and factors that influence currency exchange rates such as demand and supply, economic indicators, and market participant views. It also provides examples of hedging foreign currency exposures through futures contracts.
Abhishek BMA WC
- 2. corporate membership in National Stock Exchange Ltd, Bombay Stock Exchange Ltd. and Central Depositories Securities Ltd. BMA Commodities Limited - corporate membership in commodities exchange of NCDEX and MCX. It is also is SEBI approved AMFI registered Mutual Fund advisory and intermediary. A premier financial services organization providing individual and corporates with customized financial solutions.
- 4. • Largest Financial market • 24-hr market • Average daily trade – over US $ 3.5 trillion
- 5. World traded currency – Dollar Investment currency in capital markets. Reserve currency of Central Banks. Transaction currency in many commodity markets. Invoice currency for many contracts.
- 6. Demand & Supply Forces Dollar against major currencies like Euro, Pound, Yen Global Asian Stock markets Indian Stock markets Economic factors Government budget deficits Interest rates Inflation Fiscal and Monetary Policy BOP
- 7. Banks Importers & Exporters Corporate Individual View on appreciation or depreciation of USD/INR
- 8. Indian rupees per currency unit averaged over the year currency code 1996 2000 2004 2006 2009 2010 2011 U.S. dollar USD 35.444 44.952 45.340 43.954 48.76112 45.3354 51.22 Canadian dollar CAD 26.002 30.283 34.914 41.098 42.92026 44.5915 52.1706 Euro* EUR 44.401 41.525 56.385 64.127 68.03312 60.5973 65.6987 Pound sterling GBP 55.389 68.119 83.084 80.633 76.38023 71.3313 83.6329 Swiss franc CHF 28.714 26.654 36.537 40.451 45.05846 45.9957 57.3525 Australian dollar AUD 27.761 26.157 33.409 36.972 38.58082 43.9854 53.9759 Japanese yen JPY 0.5555 0.41711 0.41945 0.42627 0.52239 0.545447 0.6907 Singapore dollar SGD 25.160 26.079 26.830 30.932 33.60388 34.5127 41.2737 *before Jan 1, 1999, European Currency Unit, code XEU
- 10. Case 1. Exporter earns goods worth USD 1,00,000 on 10th May & payment expected in JULY 2012. Spot Rate on 10th may INR 55.41 USD Amount payable on 10th may 55,41,000 Buy 3 months future contracts Futures price = spot + Cost of carry USD 55.72 (55.41+0.31) Future price in INR Rs . 55,72,000 Spot rate on 10th July 12 INR 57.97 per USD If not hedged payment would Rs. 57,97,000 Saving due to hedging Rs. 2,25,000
- 11. Exporter earning USD 1,00,000 for JULY 10, expecting remittance on 10 JULY 2012 Spot rate on 30th may INR 53.46 per Dollar Sell 1000 USDINR contracts JULY Futures Price = Spot+ Cost of Carry INR 53.46 per USD (53.46+0.25) Rs 53,71,000 Spot Rate on 10 JULY 12 INR 54.46 per USD(54.46+0.25) Rs 54,71,000 If not hedged receipt would be Rs 54,46,000 Loss due to hedging Rs 75,000
- 14. Derivatives are the financial instruments which derive their value from the value of the underlying asset. The underlying asset can be equity, fixed income instruments, interest rates, foreign exchange or commodities. The price movements of derivative products are related to that of the underlying securities.
- 16. Hedging: Speculation: •Interest rate volatility •Stock price volatility •Exchage rate volatility •Commodity prices volatility VOLATILITY •High portion of leverage •Huge returns EXTREMELY RISKY
- 17. A futures contract is a contract that allows the counterparties to exchange the underlying assets in future at a price agreed upon today. Following are the features of a futures contract- Contract through an exchange To exchange obligations on a future date At a price decided today For a quantity standardized by the exchange Settlement guaranteed by the clearing corporation of the exchange
- 18. Short Position: • Short selling is the selling of a currency that the seller does not own. • Short sellers assume the risk that they will be able to buy the currency at a more favorable price than the price at which they sold short. Long Position: • Long selling is the selling of a currency that the seller does own. • Long sellers assume the risk that that they won‘t be able to buy the currency at a more favorable price than the price at which thay sold long
- 19. If you are going to sell something in the near future but want to lock in a secured price, you take a short position. If you are going to receive/buy something in the future but want to lock in a secured price, you take a long position.
- 20. Expansion of the Market. Unawareness about the Hedging in the market through exchange. About the business and revenue model of brokerage companies in this field. The norms that exist in the trade between two currencies. Number Game