Module - 44
Foreign Exchange &
Currencies
CMT LEVEL - I

What is Foreign Exchange(Forex)
Foreign exchange rate is the value of
foreign currency relative to domestic
currency
Exchange of currencies is done in the
foreign exchange market, which is
one of the biggest financial market

Exchange Rate
Base Currency
• First currency in a currency pair
Terms Currency
• Second currency in a currency pair

Example of Exchange Rate
Base Currency Term Currency Relationship
US Dollar Indian Rupees (US$ - INR)
British Pound INR (GBP – INR)
Japanese Yen US $ (JPY – USD)

Currency Table
USD EUR GBP JPY
USD 1 0.7468 0.6627 99.19
EUR 1.339 1 0.8869 132.66
GBP 1.509 1.1275 1 149.53
JPY 0.0101 0.0075 0.0067 1

Factor affecting Exchange Rate
Fundamental
Factor
Economy
Government
Policies
Technical Factor
Interest Rates
Inflation Rate
Exchange Rate
Policy
Central Bank
Intervention
Political Factor
Speculation

Why Currency Derivative?
Transparency & Efficient
Price Discovery
Elimination of Counter
Party Risk
Access to all type of
Market Participant
Standardized Product Trading Platform

Participants in Currency Trading
Importers & Exporters Hedgers Speculators
Traders Arbitragers