Lect1FXMOrgStudent.ppt - International Financial Markets...

Info icon This preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
International Financial Markets and Institutions COMM 377 The Currency Market organization Ali Lazrak
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Learning Objectives Be familiar with the size and the scope of the foreign exchange market Given any currency transaction, be able to predict how the foreign exchange market is going to handle it and how trades take place Given a set of market makers currencies’ quote , be able to: Explain what they mean (cross rates and bid/ask) Check if the quotations are consistent and, if not, be able to implement an arbitrage strategy to profit from it. 3
Image of page 2
Possible causes of currencies (CAD etc): Oil prices, doubled oil production In case of CAD depreciation, tourism, export industry (lumber) will florish; import industry will be much harder. The commodity currencies are currencies from countries that possess large quantities of commodities or other natural resources. Natural resources often constitute the majority of the countries' exports, and the strength of the economy can be highly dependent on the prices of these natural resources. Countries that are rich in natural resources include Russia, Saudi Arabia, Nigeria and Venezuela. However, the currencies of many natural-resource-rich countries are either regulated by the government or otherwise rarely traded in international markets. Therefore , commodity trading typically focuses on three countries that are rich in natural resources and also have liquid, freely floating currencies : Canada, Australia and New Zealand. Brexit: British pound depreciation against US dollar. (as a result of change in political policy)
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Outline Importance of the foreign exchange market Foreign Exchange Market (FXM): Products and technicalities Organization of FXM Transaction costs and arbitrage 4
Image of page 4
Overview A tour of the important concepts in international finance o Foreign exchange risk o Political risk o Market imperfections A currency crisis is when serious doubt exists as to whether a country's central bank has sufficient foreign exchange reserves to maintain the country's fixed exchange rate. The crisis is often accompanied by a speculative attack in the foreign exchange market. Canada – China G20: Export Canadian oil from the prairie to China (soft version of political risk) 2008 financial crisis, USD appreciates- US housing market; Japanese YEN, Swiss Franc, gold; public panic; outflow of all other currencies due to panic; everyone goes to USD
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern