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TERMS USED IN FOREX MARKET

Discuss TERMS USED IN FOREX MARKET within the Financial Management ( FM ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; 1. Bid rate: The bid rate denotes the number of units of a currency a bank is willing to pay ...

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TERMS USED IN FOREX MARKET
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Abhijeet S
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abhishreshthaa
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TERMS USED IN FOREX MARKET - September 10th, 2010


1. Bid rate: The bid rate denotes the number of units of a currency a bank is willing to pay when it buys another currency.



2. Offer rate: The offer rate denotes the number of units of a currency a bank will want to be paid when it sells a currency



3. Bid offer spread: The difference between the ask and bid rates. E.g. [(DEM/USD)ask – (DEM/USD)bid]



4. Value date: The settlement of a transaction takes place by transfers of deposits between two parties. The day on which these transfers are effected is called the Settlement Date or the Value Date.



5. Swap transaction: A swap transaction in the foreign exchange market is combination of a spot and a forward in the opposite direction.


Thus a bank will buy DEM spot against USD and simultaneously enter into a forward transaction with the same counter party to sell DEM against USD against the mark coupled with a 60- day forward sale of USD against the mark.


As the term ‘swap’ implies, it is a temporary exchange of one currency for another with an obligation to reverse it at a specific future date.



a) European quotes: The quotes are given as number of units of a currency per USD. Thus DEM1.5675/USD is a European quote.



b) American quotes: American quotes are given as number of dollars per unit of a currency. Thus USD0.4575/DEM is an American quote



c) Direct quotes: In a country, direct quotes are those that give unit of the currency of that country per unit of a foreign currency. Thus INR 35.00/USD is a direct quote in India.



d) Indirect quotes: Indirect or Reciprocal Quotes are stated as number of units of a foreign currency per unit of the home currency. Thus USD 3.9560/INR 100 is an indirect quote in India.
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Re: TERMS USED IN FOREX MARKET
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Rose Marry
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Re: TERMS USED IN FOREX MARKET - April 12th, 2016

Quote:
Originally Posted by abhishreshthaa View Post

1. Bid rate: The bid rate denotes the number of units of a currency a bank is willing to pay when it buys another currency.



2. Offer rate: The offer rate denotes the number of units of a currency a bank will want to be paid when it sells a currency



3. Bid offer spread: The difference between the ask and bid rates. E.g. [(DEM/USD)ask – (DEM/USD)bid]



4. Value date: The settlement of a transaction takes place by transfers of deposits between two parties. The day on which these transfers are effected is called the Settlement Date or the Value Date.



5. Swap transaction: A swap transaction in the foreign exchange market is combination of a spot and a forward in the opposite direction.


Thus a bank will buy DEM spot against USD and simultaneously enter into a forward transaction with the same counter party to sell DEM against USD against the mark coupled with a 60- day forward sale of USD against the mark.


As the term ‘swap’ implies, it is a temporary exchange of one currency for another with an obligation to reverse it at a specific future date.



a) European quotes: The quotes are given as number of units of a currency per USD. Thus DEM1.5675/USD is a European quote.



b) American quotes: American quotes are given as number of dollars per unit of a currency. Thus USD0.4575/DEM is an American quote



c) Direct quotes: In a country, direct quotes are those that give unit of the currency of that country per unit of a foreign currency. Thus INR 35.00/USD is a direct quote in India.



d) Indirect quotes: Indirect or Reciprocal Quotes are stated as number of units of a foreign currency per unit of the home currency. Thus USD 3.9560/INR 100 is an indirect quote in India.
Hey friend,

Please check attachment for Notes on Currency Trading, so please download and check it.
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