dyanamics of forex

Dynamics of Forex : 

Dynamics of Forex By Nilesh Prabhu

About the Company.. : 

Greenback Forex Services is one of India’s Leading premier consultants in the area of Currency and Interest Rate Risk Management. Greenback offers customised services in Forex Exposure Management, Trade Finance, Derivatives Advisory and Regulatory Consultancy Established in 1995 Associated with over 1500 clients some of which are: Nicholas Piramal Vodafone Essar Ltd. Moser Baer India Ltd. Yash Raj Films Pantaloon Retail India Ltd. IPCA Laboratories Ltd. Pidilite Industries Ltd. Nokia Glenmark Pharmaceuticals Ltd. Adani Exports Ltd. About the Company..

Slide 3: 

International FX market Features Trades 24-Hours a Day from Monday to Friday. Has Maximum Liquidity , daily turnover of nearly $1.5 Trillion. Almost 80-90% of the transaction are speculative in nature. Is Over The Counter Market. Participants – Banks, Hedge funds, Mutual Funds, Investors. Major markets – London, New York, Tokyo, Australia, etc.

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Features Trades between 9.00a.m- 5.00 p.m. from Monday to Friday. Only Authorised Dealers (ADs) are allowed to participate in the Interbank market. Central Bank (RBI) is an important participant and intervenes the market to manage the float. Corporate have to deal through the ADs. Rupee is quoted directly against the dollar. Rupee rates for other currencies are calculated through the dollar. Imperfect market- Arbitrage opportunities exist. Indian FX market

Risks : 

Currency Risk: Risk that the currency rates will move in the adverse direction. Example : In case of USD/INR, if USD depreciates the Indian Exporter would be at loss and if USD appreciates the Indian Importer would be at a loss. Interest Rate Risk: Every entity in the market is subject to a particular rate of interest at which it could borrow or lend money. Fluctuations in the such interest rates and the consequent change in cash flows and profitability gives rise to interest rate risk. Risks

Slide 6: 

Why Do Exchange Rates Move ?

Approaches to analyzing currency movements : 

Technical Analysis Fundamental Analysis Approaches to analyzing currency movements

Fundamental Analysis : 

It is a method of forecasting future price movements of a financial instrument based on economic, political, environmental and other relevant factors, as well as data that will affect the basic supply and demand of whatever underlies the financial instrument Economic Indicators Leading Indicators Trade Balance Consumer Price Index (CPI) Gross Domestic Product Consumer Confidence Index (CCI) Industrial Production Retail Sales Unemployment Rate FOMC Rate Decision Business Inventories Prime Rate Fundamental Analysis

Technical Analysis : 

Technical Analysis is a method of predicting price movements and future market trends by studying what has occurred in the past using charts. The Technical approach concentrates on prices, which neutralizes external factors. Pure technical analysis is based on objective tools (charts, tables) while disregarding emotions and other factors. Technical Analysis

Currency Hedging : 

As mentioned earlier, participants in Foreign Exchange markets are exposed to adverse currency movements. Hence the need for hedging arises. What is hedging? Hedging is the process of mitigating risks pertaining to movement of currency rates in the adverse direction. Following are the hedging instruments: a) Forwards b) Options - A contract which provides the buyer “right but not the obligation, to buy or sell a specific asset at a specific price, on or before any time prior to the specific date.” Currency Hedging

My Involvement with Greenback : 

Office would open at 8:30 and close at 6:00. First half of the day (prior to lunch) would be spent in the advisory room. This room consisted of the different screens used for retrieving rates, analyzing charts and pretty much everything else related to analysis of currency movements. Second half of the day would be spent in contacting prospective clients and fixing appointments to introduce the different services provided by Greenback. On days where no meetings could be fixed, there would be training sessions. My Involvement with Greenback

What I learnt from my summer Internship : 

My Interaction with the analysts and other co workers has helped broaden my perspective of the Foreign Exchange Market The training sessions at Greenback provided detailed information on various aspects mentioned earlier. My Interaction with clients has helped me understand the nature of questions that intrigue them as well as their area of interests. My Interaction with clients made me realize that marketing is incomplete without the knowledge of Finance at least in this field of business. What I learnt from my summer Internship

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Thank You