The Global Forex markets - The Global forex markets By A.V....

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The Global forex markets By A.V. Vedpuriswar
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Acknowledgement This presentation draws heavily from BIS data and the Pacific Exchange Rate Service website maintained by Prof. Werner Antweiler of the University of British Columbia
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Introduction International Trade - Barter Bond issues to finance infrastructure projects in developing countries (19th century) Gold Standard (1879 - 1934) Bretton Woods (1944 - 1971) 1960s: Decline of U.S Economy 1971: Devaluation of Dollar Managed / Dirty float America, Germany first to free capital flows Britain, 1979, Japan, 1980 (mostly) France, Italy remove restrictions in 1990 Currency Board in Hongkong, Argentina- Dollarisation? Creeping peg in Brazil
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Players : Individuals, corporate banks, central banks and securities firms More than 97 % or trading is speculative Trading almost around the clock
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Global forex trading Auckland Sydney Tokyo Singapore Frankfurt Zurich Paris London New York
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Peak trading during European waking hours New York most active when Europe is open During afternoon, New York becomes more volatile Worst time to trade - after New York closes but Sydney has not opened
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The foreign exchange market is unique because of its trading volumes, the extreme liquidity of the market, the large number of, and variety of, traders in the market, its geographical dispersion, its long trading hours: 24 hours a day (except on weekends), the variety of factors that affect exchange rates the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes) As such, it has been referred to as the market closest to the ideal of perfect competition.
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Unlike a stock market, where all participants have access to the same prices, the forex market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. As we move to the next level of access, the difference between the bid and ask prices widens . This is due to volume. If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread.
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The levels of access that make up the forex market are determined by the size of the “line” (the amount of money with which they are trading). The top-tier inter-bank market accounts for 53% of all
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The Global Forex markets - The Global forex markets By A.V....

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