Intro to foreign exchange

Intro to foreign exchange - I ntroduction to Foreign...

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Click to edit Master subtitle style Introduction to Foreign Exchange Markets
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The Amazing FX Market n Foreign exchange transaction q the trade of one country’s currency for that of another country q “price”= exchange rate, i.e. # of units on one currency that must be traded to acquire a unit of the other currency n Over the counter (OTC) spot market where brokers & dealers negotiate directly: No central exchange or clearing house n About $1.9 trillion is traded daily around the world q Over 10 times any other market q Example: New York Stock Exchange (NYSE) daily trading ~$46 billion n NYSE trading volume 2% FX turnover!
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Instruments Traded: dominance of a few currencies n Major currencies traded: (Shares out of 200%) Cumulative Share q US dollar USD 89 q Euro EUR 37 q Yen JPY 20 146 (73%) q British pound GBP 17 q Swiss franc CHF 6 q Australian dollar AUD 5.5 174.5 (87%) q Canadian dollar CAD 4.2 q Swedish Krona SEK 2.3 q Hong Kong Dollar HKD 1.9 q Norwegian Krone NOK 1.4 q South Korean Won KRW 1.2 185.5 (93%) q Mexican Peso MXP 1.1 q New Zealand Dollar NZD 1.0 q Singapore Dollar SGD 1.0 q Danish Krone DKK 0.9 q South African Rand ZAR 0.8 190.3 (95%) q Etc.: Polish Zloty, Taiwan dollar, Indian Rupee, Brazilian Real, Czech Krone, Thai Baht, Hungarian Forint, Russian Ruble, Malaysian Ringitt, Argentine Peso, Chile, … (3.6%) n U.S. Dollar remains the "vehicle currency" involved in most transactions –87% of fx transactions involve a “dollar leg” Next big three
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Instruments Traded: the dominance of a few markets n Where? (Shares out of 100%) FX Cumulative OTC FX Options Cum . q London 31 43 q New York 19 24 q Tokyo 8 59% 3 70% q Singapore 5.2 1.1 q Germany 4.9 3.0 q Hong Kong 4.2 73% 1.0 75% q Sydney 3.2 1.2 q Canada 2.2 1.2 q Bahrain 0.1 79% 2.1 79% q 50 countries total!
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