国际金融课件讲义4

LessonFourForeignExchangeandForeignExchangeControlLearningObjectivesForeignexchange(FX)Foreignexchangemarket(FXMarket)FXquotationsExchangeControlChina’sFXSystemUSDEURJPYForeignExchangeistheprocessbywhichthecurrencyofonecountryisexchangedforthatofanother.FXMeaning:currencyandbankdepositsthataredenominatedinforeignmoneyThecurrencyofacountryotherthanone’sownTheexchangingofthecurrencyofonecountryforthatofanotherThepracticeofbuyingandsellingthemoneyofothercountriesFXExamplesare:Telegraphictransfers(T/T);Banktransfersmadebycable；电汇

Mailtransfers(M/T)；Banktransfersmadebymail；Bills(billsofexchange)汇票demanddrafts(orbills)即期汇票=sightdraftschecks:writtenordertoabanktopaymoneybanker’sdrafts:achequepayableondemanddrawnbyabank银行汇票ExamplescontinuedCoupons:oneofaseriousofpromissorynotesofconsecutivematuritiesattachedtoabondorotherdebtcertificateandtobedetachedandpresentedontheirrespectiveduedatesforpaymentofinterest息票Traveler'schecks:aspecialkindofcheckissuedbyabanktoatravelerwhocangetpaymentatsightatabank,store,hotel,etc.almosteverywhere.ForeignnotesandcoinsFXBasicsConvertibility

–thedegreethatonecurrencycanbeexchangedforanotheronewithoutdifficultyHardCurrency

–isacurrencythatisconvertibleandissupportedbyastrongeconomySoft(lessortraded)Currencies-areofficiallytradablecurrencies,butareoftenilliquidanddifficulttotrade.Non-tradableCurrencies-arerestrictedbytheirgovernments.FXRatea.ExchangeRates Therateatwhichmoniesofdifferent countriesareexchangedb.Exchangeratechangesandinternationaltrade Acurrencyappreciates

invaluewhenitsvaluerisesinrelationtoanothercurrency Acurrencydepreciatesinvaluewhenitsvaluefallsinrelationtoanothercurrencyc.Casestudy1FXRateBasicsBidprice(buyingrate)–thepricethedealeriswillingtobuyacurrencyatOfferprice/askprice(sellingrate)–isthepricethedealersellscurrencyforSpread

–isthedifferencebetweenthebuyandsellpricefromthedealer’spointofview.ForeignExchange

TransactionsBanksprovideforeignexchangeservicesforafee:thebank’sbid(buy)quoteforaforeigncurrencywillbelessthanitsask(sell)quote.Thisisthebid/askspread.bid/ask%spread=

askrate–bidrate askrateExample: Supposebidpricefor£=$1.52, askprice=$1.60. bid/ask%spread=(1.60–1.52)/1.60=5%ForeignExchangeMarketMeaningPlaceofForeignExchangeTransactionMechanism

(System)ofForeignExchangeTheFXmarketnosingle,physicallocationcomputer/telephonenetworkLondon,NY,Tokyo,Singapore,HKEurocurrencymarketForeignExchangeMarketPlayersintheforeignexchangemarketCommercialbanks,largecorporations,non-bankfinancialinstitutions,centralbanksCommercialbanksarebyfarthelargestplayersintheforeignexchangemarket.HoweverlargecorporationslikeIBMandGEalsoengageinsignificanttransactions.AnothergroupsofimportantplayersarecentralbanksFXMarketSpotvsForwardMarketsSpot:marketforimmediatetransactiontechnically,two-daysettlementForward:marketfordefinitetransactioninfuturesettlementoccursonspecifieddateforwardpricemaydifferfromthespotpriceForeignExchangeMarketVolumeHuge!$1.7Trillion/day87%oftradesinvolveUS$MostlyCapitalAccountTrading(over90%)DailyTrading(bilUSD)%ofGDPUSA350.94.12Japan148.63.91Germany94.33.99U.K.637.345.91Singapore139.0164.70HongKong78.647.35Korea3.51.09China0.20.02Mexico8.60.66ExchangeRateQuotingAnexchangeratecanbequotedintwowaysDirect(American)termsandindirect(European)termsDirectTermsPriceofforeigncurrencyintermsofnationalcurrencyHowmanyunitsofnationalcurrencydoweneedtobuyaunitofforeigncurrencyExample$/€,$/¥LastFriday’sdollar-euroexchangerateis

??IndirectTermsPriceofnationalcurrencyintermsofforeigncurrencyHowmanyunitsofforeigncurrencydoweneedtobuyaunitofnationalcurrencyExample€/$,¥/$LastFriday’seuro-dollarexchangerateis？ForeignExchangeQuotationsAcrossexchangeratereflectstheamountofoneforeigncurrencyperunitofanotherforeigncurrency.Valueof1unitofcurrencyAinunitsofcurrencyB= valueofcurrencyAin$ valueofcurrencyBin$DeterminationoftheSpotExchangeRateWhatdeterminestheexchangerate?DemandandsupplyList3reasonsindividualsorbusinesses,athomeorabroad,woulddemandforeigncurrencyinexchangeforCanadiancurrency(eachreasonshouldbeadifferenttypeofactivity)List3reasonsindividualsorbusinesseswouldsupplyforeigncurrencyinexchangeforCan$.Whatfactorsmightaffectdemandandsupply?Reasonstodemandforeigncurrency1.meetcurrentneed-buyimportsofgoodsandservices,sendagiftorpayinvestmentincome2.purchaseforeignassetsorfinancialproducts-stocks,bonds,directinvestments3.hedgeorspeculate-eitherbuycurrencytoprotectagainstpossiblefuturefluctuations,ortobetonresultsoffuturecurrencyfluctuationsReasonstosupplyforeigncurrencybuyexportsofgoodsorservices,orpayinvestmentincometoCanadiansinvestinCanadaorbuyCanadianrealorfinancialassets(stocks,bonds,bankdeposits)hedgeagainstorspeculateonanappreciationoftheCanadiandollarNote:firstreasonrelatestocurrentaccounttransactions2ndreasonrelatestocapitalaccounttransactionsDeterminationoftheSpotExchangeRateAdemandfordollarsisgeneratedwhenforeignerswanttobuydollarstoacquireU.S.goods,servicesorU.S.assetsAsupplyofdollarsisgeneratedwhenholdersofdollarswantacquireforeigngoods,servicesorassetsForeignExchangerate(Yenperdollar)Dollars(MillionsperDay)120SupplyDemandOtherFactorsAffectingExchangeRatesInflationDifferentialIncomeDifferentialGov’tTradeRestrictionsInterestRateDifferentialCapitalFlowRestrictionsU.S.DemandForForeignGoodsForeignDemandForU.S.GoodsU.S.DemandForFCSupplyofFCForSaleU.S.DemandForForeignSecuritiesForeignDemandForU.S.SecuritiesU.S.DemandForFCSupplyofFCForSaleExchangeRateBetweentheForeignCurrencyAndtheDollarChangesintheExchangeRateFactorsthatcauseacurrencytodepreciate:Arapidgrowthofincome(relativetotradingpartners)thatstimulatesimportsrelativetoexports.Ahigherrateofinflationthanone'stradingpartners.Areductionindomesticrealinterestrates(relativetoratesabroad).