Even when the financial system collapsed in the past year, and millions of investors lost billions of dollars, a "neinvestor" received a historical earnings, his name is John Paulson (John Paulson), it is hedge fund manager in New York.
His firm earned $ 20 billion between 2007 and early 2009, playing against the real estate market and big financial companies. Personal income Paulson make almost $ 4 billion, or more than $ 10 million a day. This is more than the income JK Rowling, Oprah Uinnfri and Tiger Woods combined for the year 2007.
How did he do it? Believing that the approaching collapse of the real estate market, Paulson has spent about $ 1 billion in 2006 to purchase insurance from the fact that he had already identified as high-risk mortgage investments. When the real estate market and mortgages collapsed, the cost of insurance Paulson rocketed. In that year one of his funds grew by 500%. Then, in 2008, he opened a short position on the financial assets of companies or put on the fact that they will fall in price, earning again, when the prices of these companies collapsed.
Is there in this case, some investment skills that can learn to investors, based on the stories of his success? Yes. Of course, no guarantees, but the success of Paulson and several other former unsuccessful investors gives support to people who are trying to compete with the pros on Wall Street.
Below are 8 tips on investment of $ 20 billion Paulson's game, which is the greatest example in financial history:
1. Do not rely on the experts
Many investors lost heavily in 2007 and 2008 on housing construction and collapse of the stock market. But no one lost more than commercial and investment banks, caught in the trap of toxic mortgage securities. These bankers were the ones who have created such investments, and the best analysts on Wall Street vouch for their reliability, just when Paulson and others set against the investment.
Lesson: When Wall Street puts its' latest product is a win-win "- be skeptical.
2. Problems bubbles
Some academics argue that financial markets become more efficient. But the rapid growth of financial bubbles in recent years, including real estate, technology and Asian currencies, confirm that is just hard to navigate, and markets are increasingly inclined to exaggeration. Today, investors of any gauges read the same article, watch the same TV business programs and see this same tips. They invariably take a course on the output simultaneously.
Lesson: Have an exit strategy and cash to cushion any fall.
3. Focus on the debt market
Most investors track the ups and downs of the stock market, but have a vague idea of the movement in the debt market. Is a mistake. Early signs of trouble were seen in markets with high levels of competition that are not in the center of attention, such as the subprime mortgage market bonds. These problems eventually led to collapse the housing market, stock markets and the economy as a whole, that Paulson and his team christened as the "domino principle".
Lesson: Debt markets can play a generally larger role in predicting problems than the stock markets.
4. Development of new investment
Paulson has earned a huge profit on the purchase of credit default swaps (CDS), derivative investments that are insured debt. When the risky mortgage bonds fell in price, insurance Paulson rocketed. However, many experts were confused by the CDS contracts or shied away from the relatively new investments for themselves. Paulson and his team had no experience with CDS contracts, but they spent some time studying them.
Lesson: Learn a variety of trading instruments, some of them can play a valuable role in the portfolio.
5. Insurance premiums
Number of investors worried about an explosion in the housing market, but few do something, even though such CDS contracts at that time sold at extremely low prices. Investing in stock options "not in the money" pays off only when the market falls, at the time they also traded at reasonable levels. Since this insurance was very cheap - many professionals ignore it.
Lesson: Do not underestimate the importance of insurance, such as a put option.
6. The value of experience
Some of the biggest winners during the crisis were middle-aged investors, who was fired for past services. But they have encountered with past market downturns, and some bankers and analysts were caught off guard, because they knew only the good times.
Lesson: A historical perspective can be a valuable tool.
7. Do not forget
In early 2009 Mr. Paulson has become more inclined to bullish trend on the banks and financial companies, against which he set in 2008, as the latter improved their balance sheets. These steps led to profits this year.
Lesson: Even the most successful trade can not last forever.
8. Luck helps
In early 2006, Mr. Paulson decided that the real estate market problems and intended to profit from the coming fall. But some real estate experts have already decided that it was overvalued, while others set against the real estate market, but have not been able to fix their losses. Just months after the historic trade Paulson, real estate prices in the United States again began to fall.
Wednesday, November 18, 2009
Retail sales in the U.S. increased by 1.4% in October
The volume of retail sales in the U.S. grew in October at 1.4% due to higher car sales.
Sales of cars increased in the reporting period to 7.4%. Retail sales excluding auto sales rose in October at 0.2%. Economists had expected growth of this indicator on 0,3%. Sales of durable goods excluding automobiles were quite weak. In turn, sales of consumer goods in general have shown growth.
Growth of retail sales exceeded 1%, which was expected by experts. However, the October increase was smoothed negative value for the previous month, which was revised in the direction of a significant reduction.
Sales of cars increased in the reporting period to 7.4%. Retail sales excluding auto sales rose in October at 0.2%. Economists had expected growth of this indicator on 0,3%. Sales of durable goods excluding automobiles were quite weak. In turn, sales of consumer goods in general have shown growth.
Growth of retail sales exceeded 1%, which was expected by experts. However, the October increase was smoothed negative value for the previous month, which was revised in the direction of a significant reduction.
Producer prices have fallen, but consumer prices are unlikely to decrease
Today went Rosstat data, according to which producer prices of industrial production in Russia in January-October 2009 increased by 13,9% and inflation at the consumer market was 8.1%. Left commented on the financial data analyst FxPro Alexander Kuptsikevich.
Producer prices are a leading indicator of prices in the consumer market. This variability is reflected in consumer inflation with a delay. Retail players are often passed on to consumers the increased cost burden on the purchase of goods. But at the same time, as seen from the figures this year, it happens to a much lesser extent, because not only raw materials included in the price of goods and services.
In the conditions of Russia is somewhat different: if the prices of industrial goods and services vary greatly with the cycles of economic activity, the consumer prices, at best, do not grow or equal to zero. Month to month it strongly influences the dynamics, distorting it. So, by October last year, according to the Federal State Statistics Service, producers cut prices by 1,8% (in spite of the accumulated YTD growth of 13.9%), while consumer prices rose by 9,7%.
Very telling in this regard in January this year, when producer prices fell more than 3%, while the consumer rose by 2,0%. Since Russia's economy went in the direction of growth, and the government is planning greater spending for November and December, it most likely will increase consumer prices by 0,8-1,0% per month (the more so that producer prices rose consistently from February to September). This is historically the standard inflation rate for these months.
This year we are likely to get consumer prices by 10% per year. Inflation next year is likely to remain at 10-12% rather than 7 - 8% projected by the government
Producer prices are a leading indicator of prices in the consumer market. This variability is reflected in consumer inflation with a delay. Retail players are often passed on to consumers the increased cost burden on the purchase of goods. But at the same time, as seen from the figures this year, it happens to a much lesser extent, because not only raw materials included in the price of goods and services.
In the conditions of Russia is somewhat different: if the prices of industrial goods and services vary greatly with the cycles of economic activity, the consumer prices, at best, do not grow or equal to zero. Month to month it strongly influences the dynamics, distorting it. So, by October last year, according to the Federal State Statistics Service, producers cut prices by 1,8% (in spite of the accumulated YTD growth of 13.9%), while consumer prices rose by 9,7%.
Very telling in this regard in January this year, when producer prices fell more than 3%, while the consumer rose by 2,0%. Since Russia's economy went in the direction of growth, and the government is planning greater spending for November and December, it most likely will increase consumer prices by 0,8-1,0% per month (the more so that producer prices rose consistently from February to September). This is historically the standard inflation rate for these months.
This year we are likely to get consumer prices by 10% per year. Inflation next year is likely to remain at 10-12% rather than 7 - 8% projected by the government
Annual inflation in the euro area in October at the level of forecasts
According to final data of the EU statistical agency Eurostat, the annual consumer price index for the euro area amounted to -0,1% in October compared with -0.3% in the previous month. A year earlier the rate of inflation in the eurozone reached 3.2%. In monthly terms, the consumer price index for October increased by 0,2%.
Annual consumer price index excluding prices for food, tobacco, alcohol and fuel (main index) was 1.2% for the reporting period. The value of the meet analysts' forecasts.
Annual consumer price index excluding prices for food, tobacco, alcohol and fuel (main index) was 1.2% for the reporting period. The value of the meet analysts' forecasts.
Tuesday, November 17, 2009
News 11 16 2009
Mizuho holds bearish forecast for the dollar / yen
As the currency analysts Mizuho, all indicators on daily charts the dollar / yen indicate bearish sentiment couples. The bank believes that trade within the formation of a "triangle", which is now the pair will soon end, and the dollar / yen falls dramatically to the key support level of 87.00, and then to a level of 85.00 in the week. As a strategy for bank analysts prefer to sell on the best exchange rate, reinforcing the position at 90.00, with a stop above 90.75 and short-term goals of 89.29/18 and 88.25/88.00. At the moment pair dollar / yen is at around 89.47.
BNP Paribas recommends buying euro / franc
According to currency analysts BNP Paribas, the interest of the Swiss National Bank to currency intervention is likely to weaken, as the restoration of the Swiss economy is gaining momentum. However, consider a bank, in the case of a verbal intervention by the Central Bank of Switzerland, the reaction of pair euro / franc, which is now closer to the bottom of the range, can be quite significant. Thus, reducing the euro / franc at 1.5080 area in the bank is seen as a good opportunity to buy a pair. Currently, the euro / franc is trading at around 1.5090.
UBS recommended buying the dollar / yen
As the currency analysts UBS, the Minister of Finance of Japan Fuji said that he was satisfied that the yield on Japanese government bonds again began to decline. As you know, since, as Fuji joined as finance minister, his views on the dollar / yen has changed - at the bank believe that Fuji and his adviser Goten would not tolerate further strengthening the national currency. Bank analysts also note concerns regarding the sustainability of the state budget in Japan, and believe that in such circumstances, the dollar / yen should buy, not sell. At the moment pair dollar / yen is trading at 89.54
Financial sector reform is part of enhanced phase
In a statement the head of the Bank of Spain, Miguel Fernandez Ordonezom (Miguel Fernández Ordóñez) refers to the desire to reduce by one-third the number of Spanish savings and credit institutions in less than a year that marks the beginning of a strengthened phase of financial sector reforms.
From the moment that the Spanish authorities attempted to help the suffering with Caja Castilla La Mancha (CCM) during the emergency operation at the weekend in late March, the negotiation of mergers and acquisitions in order to save the country from other unreliable creditors proceeded with frustrating slowness, according to bankers and government officials.
Contributed to the list of commercial banks such as Santander and BBVA, still seemed more viable than most of their international colleagues.
However, many of the 45 banks that were not included in the list of approved stock exchange turnover, and often under political influence of the regional savings bank, succumbed to the increasingly negative influence because of bad loans to builders and homebuyers in the boom years.
Santiago Lopez Diaz (Santiago López Díaz), a bank analyst at Credit Suisse in its critical report on the banks said that Dumb of them increased their branch network in recent years, which angered participated in the bankers. They have quadrupled their total assets in a decade, developers have increased the loan by a factor of 20, recording the extraordinary growth of 43% on these loans during the period between 2002 and 2007.
At the moment, this has led to an increase in bad loans, which require more investment, this effect of pressure on the merger and the growing concerns of foreign creditors, who own a greater part of the € 450 billion of mortgage securities issued by Spanish authorities.
Fernandez Ordonez told the Financial Times that the 15 banks should be merged with others in the spring of next year, also, he intends to use the new Spanish law "Frob", which established the Foundation for the orderly restructuring of banks, for such purpose, almost $ 99 billion.
For the first time in postwar history of Spain's banks are in the spotlight. "All previous crises were due to banks", - said Ordonez. "The current crisis has paralyzed the banking system, a new phenomenon and we need to adopt a new law."
Two of the expected merger - is rescued from the CCM Cajastur, and Unicaja with Cajasur, probably, will be held with the participation of € 4 billion, which had accumulated a bank deposit insurance fund, however, that money would soon be exhausted.
With the present moment, the Bank of Spain wants stronger bank structures financed acquisitions from its own resources, which is expected to occur between different banking institutions in Navarra, Rioja, Aragon and the Canary Islands, or the same for this purpose is proposed to hold a Frob .
Grants for the taxpayers' money Frob will be available only as a last resort; Ordonez also said that the authorities expect instead to see the restructuring and closure of branches to reduce costs.
Partially can say thank you to the Bank of Spain for its strict limits and closely monitored, due to which taxpayers do not spend anything to help the banks, "said Ordonez. "In our case, is very profitable, when 80% of large and medium-sized financial institutions in relatively prosperous" - he said.
Until now, property prices in Spain fall, we're ahead of many mergers and acquisitions in the financial sector. Thus Ordonez described the difficult task of supporting the reform of the banking sector, which does not affect the Spanish taxpayers.
From the moment that the Spanish authorities attempted to help the suffering with Caja Castilla La Mancha (CCM) during the emergency operation at the weekend in late March, the negotiation of mergers and acquisitions in order to save the country from other unreliable creditors proceeded with frustrating slowness, according to bankers and government officials.
Contributed to the list of commercial banks such as Santander and BBVA, still seemed more viable than most of their international colleagues.
However, many of the 45 banks that were not included in the list of approved stock exchange turnover, and often under political influence of the regional savings bank, succumbed to the increasingly negative influence because of bad loans to builders and homebuyers in the boom years.
Santiago Lopez Diaz (Santiago López Díaz), a bank analyst at Credit Suisse in its critical report on the banks said that Dumb of them increased their branch network in recent years, which angered participated in the bankers. They have quadrupled their total assets in a decade, developers have increased the loan by a factor of 20, recording the extraordinary growth of 43% on these loans during the period between 2002 and 2007.
At the moment, this has led to an increase in bad loans, which require more investment, this effect of pressure on the merger and the growing concerns of foreign creditors, who own a greater part of the € 450 billion of mortgage securities issued by Spanish authorities.
Fernandez Ordonez told the Financial Times that the 15 banks should be merged with others in the spring of next year, also, he intends to use the new Spanish law "Frob", which established the Foundation for the orderly restructuring of banks, for such purpose, almost $ 99 billion.
For the first time in postwar history of Spain's banks are in the spotlight. "All previous crises were due to banks", - said Ordonez. "The current crisis has paralyzed the banking system, a new phenomenon and we need to adopt a new law."
Two of the expected merger - is rescued from the CCM Cajastur, and Unicaja with Cajasur, probably, will be held with the participation of € 4 billion, which had accumulated a bank deposit insurance fund, however, that money would soon be exhausted.
With the present moment, the Bank of Spain wants stronger bank structures financed acquisitions from its own resources, which is expected to occur between different banking institutions in Navarra, Rioja, Aragon and the Canary Islands, or the same for this purpose is proposed to hold a Frob .
Grants for the taxpayers' money Frob will be available only as a last resort; Ordonez also said that the authorities expect instead to see the restructuring and closure of branches to reduce costs.
Partially can say thank you to the Bank of Spain for its strict limits and closely monitored, due to which taxpayers do not spend anything to help the banks, "said Ordonez. "In our case, is very profitable, when 80% of large and medium-sized financial institutions in relatively prosperous" - he said.
Until now, property prices in Spain fall, we're ahead of many mergers and acquisitions in the financial sector. Thus Ordonez described the difficult task of supporting the reform of the banking sector, which does not affect the Spanish taxpayers.
Financial News 11 13 2009
Canada's foreign trade deficit declined in September
Canada's trade deficit fell in September to $ 927 million compared with $ 2.0 billion in the previous month.
Exports in September rose by 3,5% to $ 30.3 billion the volume of exports of Canadian goods and services continuously decreased from July 2008 and reached its minimum in May of this year. After this index rose in three of the last four months.
Automobiles, industrial goods and materials, products, machinery and equipment was the main sources of export growth in the reporting period.
The volume of imports into Canada fell in September to 0.1% to $ 31.2 billion, however, a decrease in imports in August and September failed to smooth out the sharp increase in the indicator, which was recorded in July this year.
Exports in September rose by 3,5% to $ 30.3 billion the volume of exports of Canadian goods and services continuously decreased from July 2008 and reached its minimum in May of this year. After this index rose in three of the last four months.
Automobiles, industrial goods and materials, products, machinery and equipment was the main sources of export growth in the reporting period.
The volume of imports into Canada fell in September to 0.1% to $ 31.2 billion, however, a decrease in imports in August and September failed to smooth out the sharp increase in the indicator, which was recorded in July this year.
The trade deficit in the United States rose sharply in September
According to the U.S. Department of Commerce, the country's foreign trade deficit increased in September at 18.2% to $ 36.5 billionThe published value of the index has surpassed forecasts of experts, who expected that the deficit will be $ 32.0 billion, is the most significant increase in the monthly trade deficit in percentage terms since February 1999.
In September, the volume of imports grew faster than export volumes. Foreign Trade Activity was restored to near pre-crisis level - the fall of 2008.
News 11 12 2009
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Mizuho: pound / dollar may rise to 1.6800
Against the background of improved market sentiment couple pound / dollar rebounded and now rests just below the 1.6700 mark. As the currency analysts Mizuho, steam rolled on the support trend line and 9-day moving average, and in the course of the rollback on the daily charts formed Candle doji ". According to the Bank's strategy against this backdrop pair Pound / dollar could rise again to the area of 1.6750/1.6800. As levels of resistance bank analysts put 1.6700, 1.6750 and 1.6800. Supported by speakers mark of 1.6574, 1.6515 and 1.6500. At the moment pair Pound / dollar is at 1.6666.
Euro / dollar fell after consumer sentiment data
The fall of the index of consumer sentiment University of Michigan was a complete surprise, given expectations of rising from 70.6 to 71.0 and the actual value at 66.0 points, which triggered the increased pressure on the euro / dollar. Couple tested in anticipation of the report Offer around $ 1.4850/60 turned sharply lower and checked on the strength of formal bids Asian accounts, setting a fresh session lows near $ 1.4825. Currently, the euro is kept about $ 1.4840, but the sentiment remains poor, and dealers have warned that a break below $ 1.4820 lay bare foot placed below, while the loss of support in the figures can be a catalyst more active fall
Financial Analyst FxPro Alexander Kuptsikevich: Despite grand statements about the structural changes in the global economy in the world remains a very strong desire to leave everything as is. Chapter Geithner, U.S. Treasury this week repeated the old words of "strong dollar policy" and the responsibility of States to other states for such a course. Russia called on States to take concrete action.
Overloaded sales dollar FX market in the absence of news at first tried to grow on data from China, but soon strayed to the side of the dollar (perhaps a tribute Geitner), that is, adjusted the recent decline, falling to 1.4820. However, trade remained in the same range, while maintaining the uptrend in the pair euro / dollar, which is observed in March. Stock sites operated symmetrically, however, managed to update the annual maximum, but then retreated once in a quandary.
On the one hand, we have the growth of U.S. GDP to 0.9% in the third quarter, in Germany 0.7% France 0.3%, increased activity in the housing market and a clear reversal of the monthly labor market dynamics - it good news.
Bad lie in the fact that the unemployment rate in the United States, and around the world is very high, and further projections assume its subsequent growth is about a year.
The result is that growing consumer uncertainty that keeps lending costs and depressed. Oil reserves are growing, gas storage facilities are overcrowded. Growth States, Germany, France, and Russia leads frighteningly sharp rise in budget deficit. In many countries it is a record in relation to GDP for many years, but in terms of money and did the unprecedented. And in the foreseeable future, no one is going to refuse to stimulate the economy through tax breaks and maintenance of the labor market.
The deficits are growing, export-oriented countries receive support from the restoration of consumer countries and re-accumulate reserves. The only difference is that in Asia a few more "like" gold, which successfully updates the maximum after the maximum. But this does not prevent us back to the old trend: when the world economy grows, the dollar falls. Is it that this time it will be dynamic, because it benefits the U.S. and China. Target next week 1,51-1,5150 on EUR / USD, 28,50 on the USD / RUB. Gold will cost 1,130 dollars per ounce and oil $ 80 per barrel.
Overloaded sales dollar FX market in the absence of news at first tried to grow on data from China, but soon strayed to the side of the dollar (perhaps a tribute Geitner), that is, adjusted the recent decline, falling to 1.4820. However, trade remained in the same range, while maintaining the uptrend in the pair euro / dollar, which is observed in March. Stock sites operated symmetrically, however, managed to update the annual maximum, but then retreated once in a quandary.
On the one hand, we have the growth of U.S. GDP to 0.9% in the third quarter, in Germany 0.7% France 0.3%, increased activity in the housing market and a clear reversal of the monthly labor market dynamics - it good news.
Bad lie in the fact that the unemployment rate in the United States, and around the world is very high, and further projections assume its subsequent growth is about a year.
The result is that growing consumer uncertainty that keeps lending costs and depressed. Oil reserves are growing, gas storage facilities are overcrowded. Growth States, Germany, France, and Russia leads frighteningly sharp rise in budget deficit. In many countries it is a record in relation to GDP for many years, but in terms of money and did the unprecedented. And in the foreseeable future, no one is going to refuse to stimulate the economy through tax breaks and maintenance of the labor market.
The deficits are growing, export-oriented countries receive support from the restoration of consumer countries and re-accumulate reserves. The only difference is that in Asia a few more "like" gold, which successfully updates the maximum after the maximum. But this does not prevent us back to the old trend: when the world economy grows, the dollar falls. Is it that this time it will be dynamic, because it benefits the U.S. and China. Target next week 1,51-1,5150 on EUR / USD, 28,50 on the USD / RUB. Gold will cost 1,130 dollars per ounce and oil $ 80 per barrel.
Friday, November 13, 2009
Financial News 11 11 2009
Eurozone industrial production
Eurozone industrial production index for September rose by 0,3% in monthly terms, said the EU statistical agency Eurostat. Value was below the level projected by most analysts (0.5%). Nevertheless, the August index value revised upward - from 1.1% to 1.2%.In annual terms, the euro-zone industrial output fell in September to 12,9%, compared with -15.1% in the previous month and the forecast of -14.1%. Note that the index continuously improved during the five months, after falling to -21.3% in April this year.
UniCredit expects further strengthening of the Canadian dollar
According to currency analysts UniCredit, while risky assets will be in demand, the likelihood of further reduction of a pair of dollar / Canada will continue. The bank noted that the recent decline in dollar / Canada has been significant, however, in the current environment, as only a couple make a confident break of support level at 1.04, the focus will once again be region 1.03 - 1.02. At the moment pair dollar / Canada is trading at around 1.0505.
Scotia Capital: the weakening of the Canadian dollar - just a correction
Canadian dollar today fell against the U.S. currency to a mark 1.0550 against the backdrop of an overall strengthening of the dollar. As a result, reduce the Canadian currency has lost a few points accumulated since the beginning of the week. As the analysts Scotia Capital, earlier this week the Canadian dollar strenuously making up for lost time, since the growth of the Canadian currency came later than other commodity currencies. In addition, the strengthening Canadian dollar contributed to a slight reduction in spread between U.S. and Canadian two-year bonds, as well as the general negative sentiment against the U.S. currency. However, pay attention to the bank's strategy, given that many factors indicate a lack of support for this growth, today's upward movement is likely to be regarded as rehabilitative in anticipation of the momentum that will provide dollar / Canada, a further reduction. At the moment pair dollar / Canada is trading at 1.0520
Swing trading
Swing trading in forex market trading denotes transactions undertaken in the direction of the major market trend. These traders prefer to trade in the G7 major currency pairs since these are normally more liquid compared to cross currencies and emerging market currencies. For example - when choosing between the two currency pairs Australian Dollar/ Japanese Yen and Euro/U.S. dollar, a Swing trader will prefer to trade in the latter pair.
A day trader for example has to complete his entire trading transaction in a single day. Hence day trading forex currency requires the trader to remain vigilant and track currency price movements continuously. This is done with a view to exit trades at the first available opportunity. Trend traders on the other hand have the benefit of carrying forward their deals. These traders simply trade in the direction of the market trend and are referred to as Swing traders.
In currency forex market, it is difficult to pinpoint a single best forex trading style. Forex traders differ in terms of their individual personalities, risk taking abilities and emotional balance. Most traders choose a trading style that suits their personalities the best. Swing trading style is a long term trading style. Trade positions are held open by swing traders for periods ranging from couple of days to weeks.
Is Currency Forex Market Trading Profitable?
Currency forex market trading shares many similarities with other methods of trading such as stocks and shares, but one of the key advantages is the speed that the market moves at. A good trader can place a trade in the morning and pull out many pips worth of profit on the same day, even within minutes in some cases. As a trader, you are essentially placing a stake on which way you think a particular currency pair will move, either bullish or bearish, and as long as the market moves in the direction you want it to, you will make money.
The absolute most important thing to remember is to learn how to trade before you jump in feet-first. Around 95% of people who try forex trading will ultimately lose all of their start-up capital and walk away with no money. This is because most people treat forex the same way you would treat a casino, as just a bit of fun. If you want to profit in the long-term, you need to look at this as a business, and like any business, you must learn your trade before you get started.
Another advantage of currency forex market trading is how simple it is to get set up. You will need some start up capital, although the actual amount you will need to start off with is essentially up to you. If you have thousands of dollars ready to invest, that's great, and it means that you're more likely to realise a genuine profit more quickly. If you can only spare a few hundred, again this is not an issue, you really can start with whatever you have available. You also don't need any fancy equipment to get started, or a constant phone connection to your broker. Normally, you'll make your start in the world of currency forex market trading by downloading a free piece of broker software to your computer and opening either a practice or a live account. You can normally make all of your trades through the broker software itself, so this should be all you need to get going. A reliable connection to the Internet is a must, but with mobile broadband and wi-fi being what it is these days, you can make your trades from the office, at home in bed, or enjoying a coffee in town.
SCHOOL BEGINNINGS trader. Lecture 4
2.1. Introduction to fundamental analysis
The most important and difficult part of the currency dealing is the ability to analyze trends in the market, and consequently predict what factors and how to affect exchange rates. In the movement of prices laid down as quick profit, or otherwise - the possibility of rapid and substantial losses. Therefore, the correct prediction of market movements, assessment of events, as well as the manipulation of rumors and expectations - a necessary part of the broker or dealer and the pledge of his success. There are quite a number of factors that impact on the entire foreign exchange market as a whole and for individual currencies.
There are two basic ways to analyze the situation on the market - a fundamental and technical. The first is assessing the situation from the standpoint of political, economic and financial-credit policy. The second is based on the methods of graphic studies and analysis based on mathematical principles.
As part of fundamental analysis examines the various reports of the Monetary - the financial developments in the world, the phenomenon of political and economic life of both individual countries and the world community as a whole, which may influence the development of the foreign exchange market, the analysis, to a change in exchange rates are may result. Here is important information on the stock exchanges and large-type market-makers, interest rates of central banks, government economic policy, possible changes in the political life of the country, as well as all sorts of rumors and expectations. Fundamental analysis - one of the most difficult parts - and at the same time, one of the key parts of the work in the foreign exchange market. Conduct fundamental analysis is much harder than any other, because the same factors in different contexts is not the same impact on the market, or may become a critical absolutely insignificant. It is necessary to know the mutual communication and mutual influence of two different currencies, reflecting the linkages between the various States, the history of currencies to determine the combined effect of various economic measures and to establish a link between totally unrelated at first glance, the events. In addition to some original and most formal rules, it is most needed experience of working in the foreign exchange market.
Fundamental factors are estimated, usually from two positions:
In terms of impact on the official discount rate;
From the viewpoint of national economy.
2.2. Fundamental factors influencing the market FOREX
In general, fundamental analysis identifies four factors that directly influence the market:
Economic;
Political;
Rumors and expectations;
Force majeure.
Classification of news about the extent to which they expected:
Random and unexpected - usually news of political and natural origin, less economic (political instability in the country, war, natural disasters, etc.);
Planned and expected - usually economic news, less political nature.
The economic effects and its influence on market rates is based on the axiom that any currency is a derivative of the country's economic development and its value can be regulated with the help of certain economic measures.
Economic group influences on the market can be divided into the following components:
Data on the economic development of the country;
Trade negotiations;
Meetings of central banks;
Any change in monetary - credit policy;
Meeting of the G, economic or trade unions;
Statements of heads of central banks, heads of governments, eminent economists on the situation at the market rates, changes in economic policies, economic situation in the country, or their projections;
Intervention;
Adjacent markets;
Speculation.
Let us consider each group in more detail.
2.3. This country's economic development.
The principle effects of this subgroup is based on the axiom that the value of any currency is a derivative of the state of the economy of this country. The stability of the economy determines the interest of foreign investors to invest in it and, consequently, the demand for a currency. They include such key indicators as trade and balance of payments, inflation, unemployment, gross national product, etc.
In the FOREX market to develop a common system of quotations of currencies after the U.S. dollar. Thus, the development of the American economy and the value of U.S. dollar is an important, if not decisive, factor in determining the direction of the market, common to the major currencies. Therefore, the main attention of foreign exchange brokers or dealers sent to the U.S. dollar and his "behavior" that causes some reaction from other currencies. However, this does not diminish the influence of other factors - the policy of national banks, or the influence of related markets, which are described in brief below. Monthly or quarterly in the United States published the main indicators of economic development.
Trade negotiations.
Trade negotiations are an important part of economic policy in any country. In particular, the ratio of import and export provides an important indicator of economic development as the trade deficit. For the U.S. trade deficit is a major problem in the past few years, playing a major role in the fall of U.S. dollar against major European currencies. The result of trade negotiations is an immediate response to the market, sometimes more than significant.
The meetings of central banks.
The main task of central banks is to adjust the domestic economy - as the main task. In addition, the adjustment of the internal and external value of the currency as part of his duties. Therefore, any meeting of the central bank - or more precisely, its working committee - drew attention to the participants in the foreign exchange market. One of the main means of promoting, or, conversely, slowing economic growth, attracting foreign capital, the attractiveness of government bonds, and, as a result, the value of currency is the interest rate.
2.4. Changes in monetary - credit policy.
Such measures are rarely taken to regulate the value of currencies, most central banks or governments prefer other measures the impact on the market. Nevertheless, one example may be the recent package of measures developed by the Government of Japan exclusively for the purpose of reducing the cost of the Japanese yen on the world market (also known as supplementary budget). Its main objective is to reduce the attractiveness of investment in the Japanese economy, stimulating the outflow of Japanese capital abroad, tightening rules on foreign clients who have accounts at Japanese banks, etc.
Only the expectations on this package of measures the Japanese yen had dropped in price by nearly 400 points within two - three days. However, when expectations are not met, the reverse reaction of the market is several times higher than the original cheaper.
Meetings of Seven (G7), trade and economic alliances.
One of the objectives of the G is a regulated world economy and in particular to the specific situation in the world market rates. There is some agreement among the members of the G in this regard - Agreement SVOP. The outcome of the meeting of Group of Eight may be a decision for a joint intervention in the global foreign exchange market by several central banks or other measures to limit or, conversely, to stimulate the growth of the value of a currency. In recent times, such agreements may be even, not only by members - for example, is often manifested in the joint agreement of policies on the market rates between Japan, USA and Germany.
Meetings of trade unions, govern trade relations between countries or policy of the region may also have a strong impact on a particular currency. Appeal against the U.S. and Japan in the WTO (World Trade Organization, established in January 1994 to replace GATT) after the failure of the end of the next round of trade negotiations yen left with virtually no movement by nearly a week. Meetings IIF (international monetary union), giving estimates and assumptions about the current state of the world economy, and distribute credits, does not have a direct impact on the currency, although it may cause some reaction in the market. Rather, in this situation you can count on the determination of long-term development strategy for the market as a whole than on the immediate reaction.
2.5. Statements of Heads of Government, heads of central banks, leading economists about the market situation.
This is one of the factors that, in most cases, which was an immediate response to the market. Speech by the Swiss chapter of the National Bank of Lumera disinterestedness of Switzerland in its own strong currency 29 September 1995 led to a leap in the Swiss franc from 1.1400 to 1.1480 level for several minutes, and further to 1.1580 over the next hour. Another example could be a statement by a prominent economist Bergsteyna, who, along with unexpected numbers, impaired balance of trade dollars and unreasonable expectations about the supplementary budget of Japan, led to a catastrophic collapse yen in less than two days from 97.15 to 104.55 marks, offset by a two-week efforts of the Central Bank of Japan and the U.S. Federal Reserve. Quite often, especially under certain conditions, an address of a person can not only severely affect the behavior of a currency, but also fundamentally change the situation on the market.
If the fundamental news contradict the trend, while its impact on the dynamics of the market may be limited to an hour or several hours. If, however, a fundamental factor confirms the trend, it is his acceleration, followed by a rollback.
The cycle life of the fundamental factors:
Short cycle: no more than one day, for all the unexpected news.
Long cycle: from a few weeks to several years, all factors associated with the overall state of national and world economy (the dynamics of inflation, unemployment and interest rates, etc.).
2.6. The interdependence between different countries is
The dollar zone - the Americas, led by the United States;
sterling area - UK and its former colonies;
yenovaya zone - Asia, led by Japan;
Zone EURO - Western, Central and parts of Eastern Europe led by Germany.
"Buy rumor - sell the facts":
- At the time of occurrence of hearing the main thing - to make a deal quickly because the market begins a new and powerful wave that can form strong trends;
- Traders are interested in listening to its confirmation or refutation. It is important to have quickly "jumping off the train."
2.7. Stock market and its key figures
At the exchange rate impact factors reflecting the state of the economy of the country:
Indicators of economic growth (gross domestic product, industrial production, etc.);
The trade balance, the degree of dependence on external sources of raw materials
The growth of money supply in the domestic market
Inflation and inflationary expectations
The level of interest rates
Solvency of the country and the credibility of the national currency in the world market
Speculation in the foreign exchange market
The development of other sectors of the global financial market, such as the securities market, competing with the foreign exchange market.
Money in a foreign country
Interest rates differential (the difference in interest rates)
In the form of securities: T-bills (treasury securities)
USA - Bonds
UK - Gilts
Germany - Bunds
Japan - JGB
USA - The budget deficit is negative
Japan - the budget deficit positively
This puts Japan in the main bonds USA about 60% of the market.
The Central Bank of Russia puts about 80% of its reserves in bonds USA.
Stock Indices
DJIA-USA
Nikkey - 225 - Japan
FTSE - 100 - UK
CAC - 40 - France
DAX - 30 - Germany
Hang Seng - HK (Hong Kong)
Dow Jones (DJI)
There are 4 of the Dow - Jones.
Industrial Dow - Jones (The Dow Jones Industrial Average - DJIA) - the simple average of the movement of share prices the 30 largest industrial corporations. Industrial Dow - Jones is the oldest and most common among all indicators of the stock market. Its composition is not constant: its components may vary depending on the positions of the largest industrial corporations in the U.S. economy and the market, but in the modern world, such cases are rare. In principle, it had to make up 15 to 20% of the market value of shares traded on the New York Stock Exchange. This index is calculated by adding up the prices of the included stock and dividing this sum for a fixed denominator (which is adjusted by the amount of splitting of shares and dividends in the form of shares, constituting over 10% of the market value of output, as well as replacement components, and mergers and acquisitions. Dow - Jones quoted in points. Recently he appeared on futures contracts in Chicago.
Transport Dow - Jones (The Dow Jones Transportation Average - DJTA) - average rate, which characterizes the movement of stock prices 20 transportation companies (airlines, rail and road companies).
Municipal Dow - Jones (The Dow Jones Utility Average - DJUA) - the average movement of share prices on 15 companies involved in gas and electricity.
Composite Dow - Jones (The Dow Jones Composite Average - DJCA) - an indicator on the base of industrial, transport and utilities Dow - Jones.
Index Standard and pauerz "(S & P)
The index is published independently by Standard & pauerz. It is made in two versions - for shares of 500 corporations and 100 shares of corporations.
S & P - 500 is a market value weighted index of 500 shares of corporations that are represented in it in the following proportions: 400 industrial companies, 20 transportation, 40 utility and 40 financial companies. It includes mainly shares of companies listed on the New York Stock Exchange, but there are also stocks of some companies that are traded on the American Stock Exchange and outside the stock exchange turnover. The index represents approximately 80% of the market value of all issues, listed on the New York Stock Exchange. This index is more complex compared to the Dow - Jones, but it is also more accurate because it represented a larger number of shares and corporate shares of each corporation are weighted by the amount of the value of all shares outstanding in the hands of shareholders. Futures and options thereon traded on the Chicago Mercantile Exchange.
S & P - 100. The index is calculated at about the same again as the index of 500 shares of corporations, but is made up of shares in corporations, for which there is recorded at the Chicago options exchange options. This is mainly industrial corporations.
Index of the New York Stock Exchange (NYSE Index)
This index is a weighted market value index movements in equity prices of all corporations, to register their securities on the New York Stock Exchange, that is, in fact, this figure represents the average price per share for all companies on the New York Stock Exchange, the weighted market value of shares in each corporation (with appropriate adjustments for the factors of the fragmentation of shares, mergers and acquisitions). In contrast, the Dow - Jones, which is expressed in points, the index of NYSE expressed in dollars. Transactions in options on this index are carried out at the New York Stock Exchange. Operations with futures contracts are carried out at the New York Futures Exchange, which is a unit of the New York Stock Exchange.
Indices of the American Stock Exchange (AMEX)
American Stock Exchange publishes two major index that is calculated on a completely different manner.
The main market index of the American Stock Exchange (AMEX Major Market Index) is a simple average of the price movement of 20 leading industrial corporations. He was conceived the American Stock Exchange as a sort of substitute for the industrial index Dow - Jones. Although it is calculated and published by the American Stock Exchange, it consists of shares of corporations listed on the New York Stock Exchange. Remarkably, 15 of which are also components of the industrial index Dow - Jones. Transactions in futures on the index are carried out at the Chicago Stock Exchange trading.
The index of the market value of the American Stock Exchange (AMEX Market Value Index) is calculated on a different basis: it is an indicator, weighted by market value of all issued shares in those corporations that are included in it as components. For the first time it was published in September 1973. It includes, as components of more than 800 issues of shares of securities of corporations of all major industry groups registered on the American Stock Exchange, including, in addition to ordinary shares, American depositary certificates and subscription certificates. From a technical point of view, it is unique by virtue of the fact that in his calculation, it is expected that dividends in the form of cash paid to members of its membership shares, reinvested, and on that basis they will be reflected in the index. Options on the index are traded on the American Stock Exchange.
Postcode off traffic (NASDAQ)
National Association of Securities Dealers calculates a number of indices, representing off-trafficking in general and paper companies of certain branches. The main index is the NASDAQ, which includes as a component stock of about 3500 companies (excluding listed on stock exchanges). This index is an indicator, weighted by market value of its components.
For the first time, it was calculated in February 1971.
Transactions in options and futures on this index are carried out at the Chicago Mercantile Exchange.
The drop in stock index led to the downfall of the currency.
Central banks
CB monitor inflation in the country, the national currency and seek to regulate them with the help of three key interest rates:
1. Discount Rate - Discount rate. The interest rate under which the Central Bank of commercial bank lending.
British rates are quite high, so they have a big interest of foreign investors.
2. Interest rate - Repo rate. Interest rate applicable to the Central Bank transactions with commercial banks and other lenders for the purchase (accounting) of the public treasury obligations. CB thus regulates capital market loan. Fed Funds (rate RepoUSA)
3. Lombard rate - Lombard rate. Interest rate applied by the Central Bank under the pledge of real estate, gold, currency values in issuing loans to commercial banks.
As the interest rates increased business activity and rising inflation. The decline in interest rates leads to a cheaper currency. Raising interest rates leads to a reduction in business activity, reducing inflation and the cost of the national currency. In modern conditions the method of influence on the rate of national currency continues to be the practice of buying and selling by central banks, foreign currency, known as currency intervention.
Central banks:
USA:
FED - Federal Reseve System;
The decision to change the rates adopted FOMC-Federal Open Market Committee, which met every six weeks, two days: Monday and Tuesday.
Chairman of the Board - Alan Greenspan
Germany:
Bundesbank (BBK, Buba) - The Central Bank of Germany
Buba cooncil meeting - meeting Buba - every 2 weeks on Thursdays;
Chairman - Ernst Welteke
Great Britain:
Bank of England - BOE;
Session 1 times per month;
President - Eddie George
Switzerland:
Swiss National Bank (SNB);
The meeting - every Thursday;
President - Hans Meyer
Japan:
Bank of Japan (BOJ);
Meeting 24 hours a day;
Chairman of the Board - Masaru Hayami
EU:
Europian Central Bank (ECB);
Chairman - Jean-Claude Trichet, President of the ECB
Along with central banks in the foreign exchange market operated brokerage firm, who, working with a specific bank, acted as intermediaries between the seller and the buyer's currency. To certain advantages of working through a broker can be anonymous when conducting transactions, continuous process, quotes, and the opportunity to propose their own prices.
In recent decades in the foreign exchange market has changed the nature of trade with the shift in the urgency of changing commerce: had a significant increase in transactions where performance is happening in the future. All this has led, on the one hand, to increased susceptibility of the foreign exchange market to market changes and the significant increase of currency fluctuations, and on the other hand, to increase opportunities for high-performance investment. In many markets, along with the widespread operations of buying and selling of currency transactions received from derivative financial instruments - currency and financial futures and options.
Examples of these exchanges have long been recognized by the world's centers of currency trading can be:
The London International Financial Futures Exchange (London International Financial Futures Exchange - LIFFE),
European option exchange in Amsterdam (European Options Exchange - EOE),
Urgent German Market in Frankfurt (Deutsche Terminboerse - DTB),
The Singapore Exchange (Singapore International Monetary Exchange - SIMEX) (Sydney Futures Exchange - SFE) and
Market immediate trade in Sydney.
Inflation
CPI (Consumer Price Index - CPI) - is the index of retail prices.
The index of producer prices (Producer Price Index - PPI) - this is wholesale price index.
The higher these indices, the more expensive local currency. It is believed the growth of these indices to 3% per year.
Monetary Aggregates:
M1, M2, M3, M4 - MONEY SUPPLY - monetary support.
M1 - cash in circulation, banknotes and coins;
M2 = M1 + funds settlement and current accounts in banks, traveler's checks;
M3 = M2 + time deposits in banks;
M4 = M3 + valuable state papers.
The rapid growth of money supply, both in cash and in non-cash form, has a downward impact on the currency.
Gross Product (Gross Domestic Product - GDP)
The higher the GDP, the better the economy. Optimal change - up to 3% per year if higher - feedback. You must enter a higher bid that would cause the national currency appreciation.
CPI and PPI are considered once a month, M / M.
GDP - quarterly Q / Q and are converted to year Y / Y.
Financial performance (Treasure Statement)
Income and expenses of citizens
Personal Income (Personal Income)
A sense of consumer willingness to spend money man (Consumer Sentiment)
The cost of construction (Construction Spending)
Construction (Hosing Starts)
Appeal for permission (Building Permits)
New home prices (New Houses Sales)
Current prices (Existing Houses Sales).
The unemployment rate (Unemployment Rate) - is considered to be once a month. If you raise the rate of national currency desheveet.
Primary treatment of unemployment (Imital Claims).
Ongoing Treatment (Continuing Claims).
The increase of these indicators leads to a cheaper currency.
Retail (Retail Sales) - better than the turnover, the stronger currency.
Dealer Orders for durable goods (Durable Goods).
All of the above information is on Moscow time, in 16:30 and 18:30 (Reuters, CQG)
JAPAN
Japan's fiscal year ends March 31. By the end of the year, usually to determine the balance transferred a large quantity of foreign currency into yen, which tends to rise in price. Many insurance companies of Japan are the largest players in the market: USD / JPI, USD / DEM, DEM / JPI, CHF / JPI, GBP / JPI. Big problem in Japan is an aging population. Hold on for many years, the interest rate has caused a small shift in the banking sector, but, nevertheless, Japan's banks remain the major world banks. Strengthening of South-east economy in the long term will give a chance to become the main currency of yen for the Asian region.
SWITZERLAND
Switzerland is not going to join the EU, thus stressing its independence. The attraction of CHF remains quite high, it's called "saving the currency." In moments of crisis traders from all over the world automatically buy Swiss francs, resulting in CHF usually much stronger. For example, it was on 11 September 2001, when the world learned of the terrorist attacks in New York.
UK
The availability of high interest rates in England sets the world's great interest of speculators, which affects the economic performance in general. England - a recognized global financial center, the main offices of the largest investment giants are located here in the country operates a very strict legislation governing the financial activities of companies, banks and stock exchanges
The most important and difficult part of the currency dealing is the ability to analyze trends in the market, and consequently predict what factors and how to affect exchange rates. In the movement of prices laid down as quick profit, or otherwise - the possibility of rapid and substantial losses. Therefore, the correct prediction of market movements, assessment of events, as well as the manipulation of rumors and expectations - a necessary part of the broker or dealer and the pledge of his success. There are quite a number of factors that impact on the entire foreign exchange market as a whole and for individual currencies.
There are two basic ways to analyze the situation on the market - a fundamental and technical. The first is assessing the situation from the standpoint of political, economic and financial-credit policy. The second is based on the methods of graphic studies and analysis based on mathematical principles.
As part of fundamental analysis examines the various reports of the Monetary - the financial developments in the world, the phenomenon of political and economic life of both individual countries and the world community as a whole, which may influence the development of the foreign exchange market, the analysis, to a change in exchange rates are may result. Here is important information on the stock exchanges and large-type market-makers, interest rates of central banks, government economic policy, possible changes in the political life of the country, as well as all sorts of rumors and expectations. Fundamental analysis - one of the most difficult parts - and at the same time, one of the key parts of the work in the foreign exchange market. Conduct fundamental analysis is much harder than any other, because the same factors in different contexts is not the same impact on the market, or may become a critical absolutely insignificant. It is necessary to know the mutual communication and mutual influence of two different currencies, reflecting the linkages between the various States, the history of currencies to determine the combined effect of various economic measures and to establish a link between totally unrelated at first glance, the events. In addition to some original and most formal rules, it is most needed experience of working in the foreign exchange market.
Fundamental factors are estimated, usually from two positions:
In terms of impact on the official discount rate;
From the viewpoint of national economy.
2.2. Fundamental factors influencing the market FOREX
In general, fundamental analysis identifies four factors that directly influence the market:
Economic;
Political;
Rumors and expectations;
Force majeure.
Classification of news about the extent to which they expected:
Random and unexpected - usually news of political and natural origin, less economic (political instability in the country, war, natural disasters, etc.);
Planned and expected - usually economic news, less political nature.
The economic effects and its influence on market rates is based on the axiom that any currency is a derivative of the country's economic development and its value can be regulated with the help of certain economic measures.
Economic group influences on the market can be divided into the following components:
Data on the economic development of the country;
Trade negotiations;
Meetings of central banks;
Any change in monetary - credit policy;
Meeting of the G, economic or trade unions;
Statements of heads of central banks, heads of governments, eminent economists on the situation at the market rates, changes in economic policies, economic situation in the country, or their projections;
Intervention;
Adjacent markets;
Speculation.
Let us consider each group in more detail.
2.3. This country's economic development.
The principle effects of this subgroup is based on the axiom that the value of any currency is a derivative of the state of the economy of this country. The stability of the economy determines the interest of foreign investors to invest in it and, consequently, the demand for a currency. They include such key indicators as trade and balance of payments, inflation, unemployment, gross national product, etc.
In the FOREX market to develop a common system of quotations of currencies after the U.S. dollar. Thus, the development of the American economy and the value of U.S. dollar is an important, if not decisive, factor in determining the direction of the market, common to the major currencies. Therefore, the main attention of foreign exchange brokers or dealers sent to the U.S. dollar and his "behavior" that causes some reaction from other currencies. However, this does not diminish the influence of other factors - the policy of national banks, or the influence of related markets, which are described in brief below. Monthly or quarterly in the United States published the main indicators of economic development.
Trade negotiations.
Trade negotiations are an important part of economic policy in any country. In particular, the ratio of import and export provides an important indicator of economic development as the trade deficit. For the U.S. trade deficit is a major problem in the past few years, playing a major role in the fall of U.S. dollar against major European currencies. The result of trade negotiations is an immediate response to the market, sometimes more than significant.
The meetings of central banks.
The main task of central banks is to adjust the domestic economy - as the main task. In addition, the adjustment of the internal and external value of the currency as part of his duties. Therefore, any meeting of the central bank - or more precisely, its working committee - drew attention to the participants in the foreign exchange market. One of the main means of promoting, or, conversely, slowing economic growth, attracting foreign capital, the attractiveness of government bonds, and, as a result, the value of currency is the interest rate.
2.4. Changes in monetary - credit policy.
Such measures are rarely taken to regulate the value of currencies, most central banks or governments prefer other measures the impact on the market. Nevertheless, one example may be the recent package of measures developed by the Government of Japan exclusively for the purpose of reducing the cost of the Japanese yen on the world market (also known as supplementary budget). Its main objective is to reduce the attractiveness of investment in the Japanese economy, stimulating the outflow of Japanese capital abroad, tightening rules on foreign clients who have accounts at Japanese banks, etc.
Only the expectations on this package of measures the Japanese yen had dropped in price by nearly 400 points within two - three days. However, when expectations are not met, the reverse reaction of the market is several times higher than the original cheaper.
Meetings of Seven (G7), trade and economic alliances.
One of the objectives of the G is a regulated world economy and in particular to the specific situation in the world market rates. There is some agreement among the members of the G in this regard - Agreement SVOP. The outcome of the meeting of Group of Eight may be a decision for a joint intervention in the global foreign exchange market by several central banks or other measures to limit or, conversely, to stimulate the growth of the value of a currency. In recent times, such agreements may be even, not only by members - for example, is often manifested in the joint agreement of policies on the market rates between Japan, USA and Germany.
Meetings of trade unions, govern trade relations between countries or policy of the region may also have a strong impact on a particular currency. Appeal against the U.S. and Japan in the WTO (World Trade Organization, established in January 1994 to replace GATT) after the failure of the end of the next round of trade negotiations yen left with virtually no movement by nearly a week. Meetings IIF (international monetary union), giving estimates and assumptions about the current state of the world economy, and distribute credits, does not have a direct impact on the currency, although it may cause some reaction in the market. Rather, in this situation you can count on the determination of long-term development strategy for the market as a whole than on the immediate reaction.
2.5. Statements of Heads of Government, heads of central banks, leading economists about the market situation.
This is one of the factors that, in most cases, which was an immediate response to the market. Speech by the Swiss chapter of the National Bank of Lumera disinterestedness of Switzerland in its own strong currency 29 September 1995 led to a leap in the Swiss franc from 1.1400 to 1.1480 level for several minutes, and further to 1.1580 over the next hour. Another example could be a statement by a prominent economist Bergsteyna, who, along with unexpected numbers, impaired balance of trade dollars and unreasonable expectations about the supplementary budget of Japan, led to a catastrophic collapse yen in less than two days from 97.15 to 104.55 marks, offset by a two-week efforts of the Central Bank of Japan and the U.S. Federal Reserve. Quite often, especially under certain conditions, an address of a person can not only severely affect the behavior of a currency, but also fundamentally change the situation on the market.
If the fundamental news contradict the trend, while its impact on the dynamics of the market may be limited to an hour or several hours. If, however, a fundamental factor confirms the trend, it is his acceleration, followed by a rollback.
The cycle life of the fundamental factors:
Short cycle: no more than one day, for all the unexpected news.
Long cycle: from a few weeks to several years, all factors associated with the overall state of national and world economy (the dynamics of inflation, unemployment and interest rates, etc.).
2.6. The interdependence between different countries is
The dollar zone - the Americas, led by the United States;
sterling area - UK and its former colonies;
yenovaya zone - Asia, led by Japan;
Zone EURO - Western, Central and parts of Eastern Europe led by Germany.
"Buy rumor - sell the facts":
- At the time of occurrence of hearing the main thing - to make a deal quickly because the market begins a new and powerful wave that can form strong trends;
- Traders are interested in listening to its confirmation or refutation. It is important to have quickly "jumping off the train."
2.7. Stock market and its key figures
At the exchange rate impact factors reflecting the state of the economy of the country:
Indicators of economic growth (gross domestic product, industrial production, etc.);
The trade balance, the degree of dependence on external sources of raw materials
The growth of money supply in the domestic market
Inflation and inflationary expectations
The level of interest rates
Solvency of the country and the credibility of the national currency in the world market
Speculation in the foreign exchange market
The development of other sectors of the global financial market, such as the securities market, competing with the foreign exchange market.
Money in a foreign country
Interest rates differential (the difference in interest rates)
In the form of securities: T-bills (treasury securities)
USA - Bonds
UK - Gilts
Germany - Bunds
Japan - JGB
USA - The budget deficit is negative
Japan - the budget deficit positively
This puts Japan in the main bonds USA about 60% of the market.
The Central Bank of Russia puts about 80% of its reserves in bonds USA.
Stock Indices
DJIA-USA
Nikkey - 225 - Japan
FTSE - 100 - UK
CAC - 40 - France
DAX - 30 - Germany
Hang Seng - HK (Hong Kong)
Dow Jones (DJI)
There are 4 of the Dow - Jones.
Industrial Dow - Jones (The Dow Jones Industrial Average - DJIA) - the simple average of the movement of share prices the 30 largest industrial corporations. Industrial Dow - Jones is the oldest and most common among all indicators of the stock market. Its composition is not constant: its components may vary depending on the positions of the largest industrial corporations in the U.S. economy and the market, but in the modern world, such cases are rare. In principle, it had to make up 15 to 20% of the market value of shares traded on the New York Stock Exchange. This index is calculated by adding up the prices of the included stock and dividing this sum for a fixed denominator (which is adjusted by the amount of splitting of shares and dividends in the form of shares, constituting over 10% of the market value of output, as well as replacement components, and mergers and acquisitions. Dow - Jones quoted in points. Recently he appeared on futures contracts in Chicago.
Transport Dow - Jones (The Dow Jones Transportation Average - DJTA) - average rate, which characterizes the movement of stock prices 20 transportation companies (airlines, rail and road companies).
Municipal Dow - Jones (The Dow Jones Utility Average - DJUA) - the average movement of share prices on 15 companies involved in gas and electricity.
Composite Dow - Jones (The Dow Jones Composite Average - DJCA) - an indicator on the base of industrial, transport and utilities Dow - Jones.
Index Standard and pauerz "(S & P)
The index is published independently by Standard & pauerz. It is made in two versions - for shares of 500 corporations and 100 shares of corporations.
S & P - 500 is a market value weighted index of 500 shares of corporations that are represented in it in the following proportions: 400 industrial companies, 20 transportation, 40 utility and 40 financial companies. It includes mainly shares of companies listed on the New York Stock Exchange, but there are also stocks of some companies that are traded on the American Stock Exchange and outside the stock exchange turnover. The index represents approximately 80% of the market value of all issues, listed on the New York Stock Exchange. This index is more complex compared to the Dow - Jones, but it is also more accurate because it represented a larger number of shares and corporate shares of each corporation are weighted by the amount of the value of all shares outstanding in the hands of shareholders. Futures and options thereon traded on the Chicago Mercantile Exchange.
S & P - 100. The index is calculated at about the same again as the index of 500 shares of corporations, but is made up of shares in corporations, for which there is recorded at the Chicago options exchange options. This is mainly industrial corporations.
Index of the New York Stock Exchange (NYSE Index)
This index is a weighted market value index movements in equity prices of all corporations, to register their securities on the New York Stock Exchange, that is, in fact, this figure represents the average price per share for all companies on the New York Stock Exchange, the weighted market value of shares in each corporation (with appropriate adjustments for the factors of the fragmentation of shares, mergers and acquisitions). In contrast, the Dow - Jones, which is expressed in points, the index of NYSE expressed in dollars. Transactions in options on this index are carried out at the New York Stock Exchange. Operations with futures contracts are carried out at the New York Futures Exchange, which is a unit of the New York Stock Exchange.
Indices of the American Stock Exchange (AMEX)
American Stock Exchange publishes two major index that is calculated on a completely different manner.
The main market index of the American Stock Exchange (AMEX Major Market Index) is a simple average of the price movement of 20 leading industrial corporations. He was conceived the American Stock Exchange as a sort of substitute for the industrial index Dow - Jones. Although it is calculated and published by the American Stock Exchange, it consists of shares of corporations listed on the New York Stock Exchange. Remarkably, 15 of which are also components of the industrial index Dow - Jones. Transactions in futures on the index are carried out at the Chicago Stock Exchange trading.
The index of the market value of the American Stock Exchange (AMEX Market Value Index) is calculated on a different basis: it is an indicator, weighted by market value of all issued shares in those corporations that are included in it as components. For the first time it was published in September 1973. It includes, as components of more than 800 issues of shares of securities of corporations of all major industry groups registered on the American Stock Exchange, including, in addition to ordinary shares, American depositary certificates and subscription certificates. From a technical point of view, it is unique by virtue of the fact that in his calculation, it is expected that dividends in the form of cash paid to members of its membership shares, reinvested, and on that basis they will be reflected in the index. Options on the index are traded on the American Stock Exchange.
Postcode off traffic (NASDAQ)
National Association of Securities Dealers calculates a number of indices, representing off-trafficking in general and paper companies of certain branches. The main index is the NASDAQ, which includes as a component stock of about 3500 companies (excluding listed on stock exchanges). This index is an indicator, weighted by market value of its components.
For the first time, it was calculated in February 1971.
Transactions in options and futures on this index are carried out at the Chicago Mercantile Exchange.
The drop in stock index led to the downfall of the currency.
Central banks
CB monitor inflation in the country, the national currency and seek to regulate them with the help of three key interest rates:
1. Discount Rate - Discount rate. The interest rate under which the Central Bank of commercial bank lending.
British rates are quite high, so they have a big interest of foreign investors.
2. Interest rate - Repo rate. Interest rate applicable to the Central Bank transactions with commercial banks and other lenders for the purchase (accounting) of the public treasury obligations. CB thus regulates capital market loan. Fed Funds (rate RepoUSA)
3. Lombard rate - Lombard rate. Interest rate applied by the Central Bank under the pledge of real estate, gold, currency values in issuing loans to commercial banks.
As the interest rates increased business activity and rising inflation. The decline in interest rates leads to a cheaper currency. Raising interest rates leads to a reduction in business activity, reducing inflation and the cost of the national currency. In modern conditions the method of influence on the rate of national currency continues to be the practice of buying and selling by central banks, foreign currency, known as currency intervention.
Central banks:
USA:
FED - Federal Reseve System;
The decision to change the rates adopted FOMC-Federal Open Market Committee, which met every six weeks, two days: Monday and Tuesday.
Chairman of the Board - Alan Greenspan
Germany:
Bundesbank (BBK, Buba) - The Central Bank of Germany
Buba cooncil meeting - meeting Buba - every 2 weeks on Thursdays;
Chairman - Ernst Welteke
Great Britain:
Bank of England - BOE;
Session 1 times per month;
President - Eddie George
Switzerland:
Swiss National Bank (SNB);
The meeting - every Thursday;
President - Hans Meyer
Japan:
Bank of Japan (BOJ);
Meeting 24 hours a day;
Chairman of the Board - Masaru Hayami
EU:
Europian Central Bank (ECB);
Chairman - Jean-Claude Trichet, President of the ECB
Along with central banks in the foreign exchange market operated brokerage firm, who, working with a specific bank, acted as intermediaries between the seller and the buyer's currency. To certain advantages of working through a broker can be anonymous when conducting transactions, continuous process, quotes, and the opportunity to propose their own prices.
In recent decades in the foreign exchange market has changed the nature of trade with the shift in the urgency of changing commerce: had a significant increase in transactions where performance is happening in the future. All this has led, on the one hand, to increased susceptibility of the foreign exchange market to market changes and the significant increase of currency fluctuations, and on the other hand, to increase opportunities for high-performance investment. In many markets, along with the widespread operations of buying and selling of currency transactions received from derivative financial instruments - currency and financial futures and options.
Examples of these exchanges have long been recognized by the world's centers of currency trading can be:
The London International Financial Futures Exchange (London International Financial Futures Exchange - LIFFE),
European option exchange in Amsterdam (European Options Exchange - EOE),
Urgent German Market in Frankfurt (Deutsche Terminboerse - DTB),
The Singapore Exchange (Singapore International Monetary Exchange - SIMEX) (Sydney Futures Exchange - SFE) and
Market immediate trade in Sydney.
Inflation
CPI (Consumer Price Index - CPI) - is the index of retail prices.
The index of producer prices (Producer Price Index - PPI) - this is wholesale price index.
The higher these indices, the more expensive local currency. It is believed the growth of these indices to 3% per year.
Monetary Aggregates:
M1, M2, M3, M4 - MONEY SUPPLY - monetary support.
M1 - cash in circulation, banknotes and coins;
M2 = M1 + funds settlement and current accounts in banks, traveler's checks;
M3 = M2 + time deposits in banks;
M4 = M3 + valuable state papers.
The rapid growth of money supply, both in cash and in non-cash form, has a downward impact on the currency.
Gross Product (Gross Domestic Product - GDP)
The higher the GDP, the better the economy. Optimal change - up to 3% per year if higher - feedback. You must enter a higher bid that would cause the national currency appreciation.
CPI and PPI are considered once a month, M / M.
GDP - quarterly Q / Q and are converted to year Y / Y.
Financial performance (Treasure Statement)
Income and expenses of citizens
Personal Income (Personal Income)
A sense of consumer willingness to spend money man (Consumer Sentiment)
The cost of construction (Construction Spending)
Construction (Hosing Starts)
Appeal for permission (Building Permits)
New home prices (New Houses Sales)
Current prices (Existing Houses Sales).
The unemployment rate (Unemployment Rate) - is considered to be once a month. If you raise the rate of national currency desheveet.
Primary treatment of unemployment (Imital Claims).
Ongoing Treatment (Continuing Claims).
The increase of these indicators leads to a cheaper currency.
Retail (Retail Sales) - better than the turnover, the stronger currency.
Dealer Orders for durable goods (Durable Goods).
All of the above information is on Moscow time, in 16:30 and 18:30 (Reuters, CQG)
JAPAN
Japan's fiscal year ends March 31. By the end of the year, usually to determine the balance transferred a large quantity of foreign currency into yen, which tends to rise in price. Many insurance companies of Japan are the largest players in the market: USD / JPI, USD / DEM, DEM / JPI, CHF / JPI, GBP / JPI. Big problem in Japan is an aging population. Hold on for many years, the interest rate has caused a small shift in the banking sector, but, nevertheless, Japan's banks remain the major world banks. Strengthening of South-east economy in the long term will give a chance to become the main currency of yen for the Asian region.
SWITZERLAND
Switzerland is not going to join the EU, thus stressing its independence. The attraction of CHF remains quite high, it's called "saving the currency." In moments of crisis traders from all over the world automatically buy Swiss francs, resulting in CHF usually much stronger. For example, it was on 11 September 2001, when the world learned of the terrorist attacks in New York.
UK
The availability of high interest rates in England sets the world's great interest of speculators, which affects the economic performance in general. England - a recognized global financial center, the main offices of the largest investment giants are located here in the country operates a very strict legislation governing the financial activities of companies, banks and stock exchanges
World currency market FOREX
The history of the international currency market.
International Monetary Market, which is now to be known as FOREX, has deep-old roots. It goes back to thousands of years BC, when Egypt's first coinage. Sami currency exchange operations in their current understanding began to evolve in the Middle Ages. This was linked to the development of international trade and navigation. The first valyutchikami are Italian menyaly that earned on the exchange rates of different countries.
With the development of interstate relations market for currency exchange operations mutate, acquiring an increasingly shape. The most significant change in the currency market have been made in the twentieth century. Finding the market advanced features started in 70 of the 20 th century, when it was lifted system of fixed rates of one currency against another.
After the lifting of restrictions on currency fluctuations, there's a new kind of business, which is based on a profit in a free system of exchange. And the change of course caused all kinds of market conditions and is regulated only by demand and supply.
30-s XX century
The world financial crisis.
There is the destruction of trade and economic ties. A thing of the past times, the rule of gold coin standard. By the mid-30's London becomes the world's financial center. British pound sterling at that time was the main currency for trade transactions and the establishment of foreign exchange reserves. Even then pound jargon called "Cable" ( "cable"). This name is linked with the fact that the means of communication with the transactions was the telegraph, and information transmitted by cable.
In 1930, the Swiss city of Basel was established Bank for International Settlements. The goal was the creation of financial support for newly independent States and is experiencing balance of payments deficit. Before the First World War, there was a so-called "gold standard". Gold has all the features of money, and paper money freely exchanged for gold, according to the guidelines listed on their official gold content. Therefore, difficulties in establishing the exchange rate does not arise. They were based on a gold parity. This mechanism could operate only in conditions of free sale of gold at a fixed price and with no restrictions on its export. This is in full prior to the First World War.
Arose during the First World War, inflation has made it impossible to maintain razmena exchange for gold and led to the collapse of the "gold standard". In the short time it was revived in 1920-ies. modified, urezannom form. The world economic crisis of 1929-1933 biennium. and it led to the collapse. Thus, in 1931, Britain was forced to cancel the "anchor" the pound sterling to gold. A period of devaluations, periodic adjustments to the parities of currencies, strengthening foreign exchange controls and import restrictions.
1944
In the U.S., was the Bretton Woods conference. It is believed the end of the US-British rivalry. The conference was attended by two major figures: John Maynard Keynes (England) and Harry Dexter White (USA). They managed to create and adopt a new order for the world financial system under the circumstances.
Bretton Woods monetary system, established in 1944. Was designed to combine the hardness inherent in the gold standard and flexibility, differentiating system oscillating courses. There was an official gold content of the national currencies of participating countries, and through it to identify each other parities of currencies. In doing so, the obligation to exchange paper money for gold were recorded. Participating countries Bretton Woods agreement had decided not to reject the exchange rate parity of the value of + / - 1%. Automatic alignment of the balance of payments should have been done by changing income and prices in response to changes in foreign exchange reserves. Only in the case of a "fundamental imbalance" was to change parity.
In accordance with the Bretton Woods agreement, the United States to guarantee the exchange of its currency to gold at a fixed rate, but to bring dollars to the amount could only central bank of another country. In addition, it is seen as a "nedruzhestvennaya" to the U.S. action and has very rarely. However, French President de Gaulle S. manner successfully added to gold reserve in France.
The main provisions of the Bretton Woods system
The International Monetary Fund has become a vital institution that monitors international financial and economic relations;
Declared currency, playing the role of international reserves (the dollar and the de facto pound);
There are adjustable parities of currencies to the U.S. dollar (possibly rejecting - 1%), the dollar is pegged to gold (ounce of gold - $ 35);
IMF members have the right to change the parities only with the consent of the IMF;
Upon completion of the transition period should be a convertible currency, for the observance of the principle of all governments commit themselves to keep international reserves and, if necessary - to carry out intervention in currency markets.
Members of the IMF makes a contribution currency and gold.
1947
For the suspension of communism, the U.S. reconstruction program are the European economy. U.S. Secretary of State Marshall, in his report obrisovyvaet plan, under which the economy of Europe ozdorovitsya to a level where it can maintain its own military capabilities. One of the challenges is utolenie "dollar famine". When in 1949 the U.S. dollar liabilities Europe accounted for 3.1 billion, then in 1959 they reached 10.1 billion dollars.
In the 60 years have been detected weakness of this system, a tendency to accelerate the pace of inflation and increasing disparities in the rates of different countries. This has led to periodic review parities. Although the Bretton Woods system and is considered an example of solid fixed-rate for the period from 1948 to 1967. currencies have changed 109 countries. The average depreciation rate was 48.2%. At least 48 countries carried out for two and a devaluation of their currencies. By 1958, most European countries declared free convertibility of their currencies.
1964
Japan announced the convertibility of its currency. Following the announcement of the convertibility of the major currencies, it became clear that the U.S. is no longer able to maintain the price of $ 35 per ounce of gold. The dollar, inflation is a threat to the United States. The Kennedy administration has taken a number of misconceptions action - imposing a tax on the interest differential, raising the cost of foreign borrowing, and a program of voluntary restrictions on foreign loans. Tax and restrictions have led to the emergence of a new market - the market evrodollarov.
1967
A devaluation of the English pound, which has caused the latest blow to the illusory stability of the Bretton Woods system.
1970
In the U.S., sharply declining interest rates, creating a dramatic crisis of the dollar. Within a short period of time going on a massive outflow of capital from the U.S. to Europe, where interest rates were higher.
May 1971
Germany and the Netherlands announced a temporary free-floating its currency.
August 1971
Inflation has swept, and the U.S.. U.S. balance of payments deficit leads to a reduction in gold from 18 to 11 billion dollars. At the same time, a rise in U.S. external debt. The market price of gold has become more than a fixed, and the U.S. can not artificially support it. Growth deficits forced the U.S. to suspend the convertibility of dollars in gold. August 15, 1971, U.S. President Robert Nixon eliminated between gold and the dollar link, and the U.S. currency lost its support.
December 1971
It was decided that the devaluation of the dollar (the first post-war period, but not the last). At a meeting in the Smithsonian Institution in Washington was a last attempt to save the Bretton Woods system. Interval deviations from parity exchange rates had been raised to 4.5%. To keep the border interval, it was very difficult. And some time later the Bundesbank held intervene in the amount of 5 billion dollars. It was a huge sum in those times, but it has not brought success. Currency markets in Europe and Japan had to be temporarily closed, while the U.S. announced the devaluation of the dollar by 10%. Developed countries have ceased to maintain a fixed parity and let currency swimming.
1973-1974
U.S. to progressively abolish the tax on interest differential and a program of voluntary restrictions on foreign loans. Bretton Woods system has ceased to exist. Since March 1973. regime of floating exchange rates is predominant.
In the last years of the Bretton Woods system of currency traders will benefit a great speculative profits in the period followed the termination of intervention of central banks. After the rejection of the possibility of extracting the fixed rate of return that have been severely limited. Many banks have suffered major losses, and two well-known - "Bankhaus Hershtadt" in Colon and Frenklin National in New York - even gone bankrupt because of failed speculation.
1976
A Jamaican Conference (in Kingston). Representatives of the world's leading states have established new principles of the world monetary system, including a shift to floating rates. States renounced the use of gold as a means to cover the deficit in international payments. The main elements of the new system are inter-state organizations, regulating foreign relations, currency convertibility. Means of payment in favor of national currencies. The main mechanism by which the international currency transactions are commercial banks.
1978
A European Monetary System (EMS). The core of EMU is a grid of cross-currency exchange rates with the central and boundary values of exchange rates. On the whole, the EMU reminds Bretton Woods. If the cross-rate closer to the border, both sides are obliged to conduct an intervention.
A key currency EMU - doychmarka.
1985
Gradually, the ECU is not counting, and physical instrument. Produced ECU-denominated traveler's checks and credit cards, banks offer deposits in the ECU.
The history of European unification
1957
In Rome, an agreement was signed on the formation of the European Economic Community. In the Community include: West Germany (FRG), France, Italy, the Netherlands, Belgium, Luxembourg.
1963
Chancellor Konrad Adenauer and President Charles de Gaulle signed a cooperation agreement between West Germany (FRG) and France.
1969
A meeting of EU leaders, which were set guidelines for a future monetary union within the European Economic Community.
1972
After the collapse of the Bretton Woods system of exchange rates of EU leaders signed the European agreement on the free swimming. For the European currencies were set limits fluctuations in their value relative to each other in the amount of 2.25%.
Collective fluctuation euro against the U.S. dollar was allowed in the amount of 4.5%.
1973
Britain, Ireland, Denmark became members of the European Agreement on the free swimming.
1978-79
Education the European Monetary System. The agreement establishing it was ratified by 9 parties - members of the European Community. The purpose of the establishment of EMU - an attempt to protect the currency of the Member States of the EEC sharp currency fluctuations.
Of the 9 signatories, only 7 have been full members: West Germany (FRG), France, the Netherlands, Belgium, Luxembourg, Denmark, Ireland. Britain did not participate in all documents, Italy joined them on certain conditions.
Simultaneously with the establishment of EMU has introduced a new currency - the ECU. The objective - the establishment of a means of payment within the EMU, and in due course - the replacement of national currencies. ECU was a basket of currencies stranuchastnits EMU. For the national currencies have been set limits on the fluctuations of the central values of 2.25%, for the Italian lira - 6%.
1981
On the European Monetary System joined Greece.
1986
In the European Monetary System will enter Spain and Portugal. For the Spanish Pesetas limits had been placed on the variation in the amount of 6%.
1990
Britain joined the exchange-rate mechanism, which was developed in the framework of EMU, with the pound sterling against the German mark to 2.9500. West Germany (FRG) and East Germany (GDR) have joined together in a unified Germany.
February 1992
In the Dutch city of Maastricht 12 Member States of the European Monetary Union signed a new Treaty on European Union. At the core of the treaty was based on the Rome Agreement of 1957. In the Maastricht Treaty had been scheduled orientations of the single European market, the European Central Bank, the single currency, common economic policy.
September 1992
Heavy times for the European currencies. There was the famous fall of the pound sterling. During the aggressive sales of pounds in the foreign exchange market the Bank of England and other members of the exchange rates were trying to keep it in an acceptable range of fluctuations in support of operations in the market. But all their efforts have not led to the desired result. Then the Bank of England was forced to raise the discount rate three times in one day in the amount of 5% in an attempt to prevent podeshevlenie pound. But the measure does not help, and pressure on the pound continued.
The famous financier George Soros was famous for the fact that playing podeshevlenie pounds and received a huge profit when he saw that the pound would not be able to keep within the established framework of exchange-rate mechanism.
Thus, the Bank of England was forced to withdraw its currency from the mechanism of exchange rates. The fate of the British pound and Italian lira divided. It was announced that they had temporarily come out of the mechanism of exchange rates.
July 1993
Out of the pound sterling exchange rate mechanism strongly influenced the movement of European currencies. All currency felt the intense pressure that has led to significant movements in the direction of their podeshevleniya. An interesting story happened with the French franc. After the devaluation of European currencies French franc remained the last bastion of stability. And then the whole market came to him in the hope that it should understand the plight of other currencies.
Remembering signed a bilateral cooperation agreement, Germany could not leave the franc at rasterzanie. Not only that Bundesbankprinimal involved in interventions in the currency market, but also for the maintenance of the franc, it was done lowering German interest rates. But even such selfless actions have not been able to save the franc from heavy podeshevleniya.
Due to such grand events in the currency market, in the mechanism of exchange rates, it was decided to increase the range of possible fluctuations of its currency to 2.25% and 6% to 15%.
December 1995
European leaders agree to introduce the euro in 1999 for countries that meet certain parameters for the largest government deficits, public debt, inflation and interest rates.
December 1996
Determine the appearance of euro banknotes.
June 1997
Determine the appearance of euro coins and euro-cents.
March 1998
The European Commission recommends a list of 11 countries that will enter the euro: Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Ireland, Portugal, Spain, Austria, Finland.
May 1998
European Parliament approves the choice of 11 countries that will enter the European Monetary Union with the new euro currency. It starts with the choice of candidates for the post of head of the European Central Bank.
January 1999
The market for non-cash transactions and quotes a new European currency euro, which replaced the ECU. 11 European countries recorded exchange rates against the euro. The European Central Bank began to manage the monetary policy of the European Monetary Union (EMU).
Euro (EUR) "became the official currency for 12 EU countries. In the euro area are:
* Germany
* France
* Italy
* Belgium
* Netherlands
* Luxembourg
* Spain
* Portugal
* Greece
* Austria
* Finland
* Ireland.
Britain, Sweden and Denmark have not yet participated in the euro zone.
Rate, foreign exchange each of the countries - members of the EMU in the euro, with the exception of Greece, was fixed 1 January 1999 (see Table 1), while, since that date, each of these currencies ceased to exist as an independent currency. Course conversion drachmas to the euro was fixed on 1 January 2001. Prior to the completion of the conversion of funds in the euro on 1 January 2002, the national currency (HB) existed as subunits of the euro.
Starting from 0.00 in the European time, 1 January 2002 Euro officially became a cash turnover of 12 EC, and the national currencies of the euro zone ceased to exist.
The concept of market FOREX, liquidity
Table 1. Fixed exchange rates of participating European Monetary Union to the Euro:
1 euro = 13.7603 Austrian schillings
= 40.3399 Belgian francs
= 1.95583 German marks
= 5.94573 Finnish markka
= 6.55957 French franc
= 340.750 Greek drachma
= 0.787564 Irish pounds
= 1,936.27 Italian lire
= 40.3399 Luxembourg francs
= 2.20371 Dutch guilders
= 200,482 Portuguese escudos
= 166.386 Spanish Pesetas
International Monetary Market, or market FOREX (Foreign Exchange, or FX), - this is the market exchange (conversion) operations, sales, accounts and granting loans to foreign currency on the specific conditions of the foreign exchange market between the parties. The conditions include the amount, the exchange rate and the performance of a specific date. FOREX Market was formed in 70 years the last century, after undo the Bretton Woods system of fixed exchange rate anchor. Since then, the FOREX is becoming the most dynamic and liquid market. This is the only market in the world, working around the clock, five days a week. The rapid movement of funds, the low cost of transactions, high liquidity makes FOREX one of the most attractive markets for investors.
The essential difference FOREX market from other markets is that it does not have any particular place of trade. FOREX is a huge network of currency dealers connected among themselves through telecommunications, distributed to all the world's leading financial centers around the clock and work as a single mechanism. Currency trading is carried out by telephone or via computer terminals - a transaction carried out simultaneously in hundreds of banks around the world.
The essence of client investments in the market FOREX - this is an operation of buying and selling of foreign exchange contracts in order to profit from changes in exchange rates over time. These operations are known as conversion, and they represent the transaction agents of foreign exchange market for the exchange of specified amounts of the currency of one country to another country's currency at an agreed rate and calculated on a specified date.
The daily volume of conversion operations in the world is from 1 to 3 trillion U.S. dollars. The major currencies, which account for the vast amount of all transactions in the market FOREX, are the U.S. dollar (USD), euro (EUR), Japanese Yen (JPY), Swiss franc (CHF) and the English pound (GBR). Transactions involving the U.S. dollar accounted for about 70%. The share of electronic brokers now account for many of an estimated more than 15% of the market Forex, and tends to increase rapidly.
There are a number of features and significant benefits of the FOREX market, compared with other financial markets:
1. First of all - free conversion of the world's leading currencies;
2. almost 100% I liquidity any transaction. Given the huge volume of transactions every day and every second committed to the FOREX (daily volume of transactions on the FOREX is from 1 to 3 trillion U.S. dollars), are here except where the transaction can not be executed because of lack of demand (as in crisis situations in the stock market shares and securities);
3. through margin trading system, widespread in the FOREX, market participants may be individuals with relatively small investments;
4. widely developed Internet trading system, the saturation of information space of the Internet provides access to current information and foreign exchange trading on the FOREX virtually any interested person from anywhere in the world where there is a possibility to connect to the Internet;
5. the possibility of carrying out transactions of sale of currencies in real time, almost instantly in response to operational information on changing market conditions or events.
For information about the state of financial markets in real time, as well as financial and economic news from Russian and international agencies use of international information systems, such as REUTERS, DOW JONES, CQG, BLOOMBERG, TENFORE etc. For more information on the systems we will in subsequent lectures.
Participants in the international currency market
Major participants in the currency market FOREX are:
* Central banks
* Commercial banks
* Currency Exchange
* Firms engaged in foreign trade
* Investment funds
* Brokerage company
* Individuals
Central banks
The basis of the FOREX market constitute the central banks of different countries. Their role is to manage foreign reserves, currency intervention, influencing the level of the exchange rate, as well as management level of interest rates on investments in local currency. Central banks are interested in maintaining rates at a level that is needed at this moment the economy of the country.
The biggest influence on world currency markets has the U.S. central bank - the Federal Reserve System (US Federal Reserve or FED). Then it was followed by the central banks of Germany - Bundesbank (Deutsche Bundesbank or BUBA) and British (Bank of England also called the Old Lady).
The central banks of countries entering the FOREX, as a rule, not for the purpose of making profits, and to check the stability or the correction of the existing national currency, as the latter has a significant impact on the economy. Central banks also fell on the foreign exchange market and commercial banks. Although profit is not the main purpose of these banks, their loss-making operations do not attract, so the intervention of central banks usually disguised and carried out chereh several commercial banks immediately. The central banks of different countries can carry out joint and coordinated intervention.
Commercial banks
In a large commercial banks performed the bulk of transactions on the FOREX banks holding accounts in the other market participants and be done with them the necessary conversion operations. Banks like to accumulate (through transactions with customers), the aggregate market demand for foreign currency conversions, as well as in attracting and placing funds and go with them to other banks. They operate under the direction of the exporters and importers, investment institutions, insurance and pension fonddov, hedzherov and private investors. Commercial banks in the market comply with orders for currency conversion, and lead their own operations (for speculative purposes and within the hedge investment risks). Customers of banks - are largely eksportnoimportnye companies, transactions in the foreign exchange market for the contracts, hedging (insurance) of its risks, as well as brokerage houses, serving their customers, leading speculation. In addition to meeting the requests of customers, banks can carry out operations, and independently in their own interests and at their own expense. Ultimately, the foreign exchange market is a market for interbank transactions, and, referring to the movement of exchange rates should be kept in mind the interbank foreign exchange market. At the world's largest foreign exchange markets influenced by international banks, the daily volume of transactions which are up to billions of dollars. These banks, like Barclays Bank, Citibank, Chase Manhatten Bank, Deutsche Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Bank. Some banks (eg, Union Bank of Switzerland) formed the bulk of profits from currency speculation.
Currency Exchange
Unlike the stock exchanges and markets for foreign currency transactions for a period of work of foreign exchange markets was not in a particular building, and during certain hours. The development of telecommunications technology, most major financial institutions in the world use the services markets directly and through intermediaries around the clock. Most major world stock exchanges are London, New York and Tokyo exchange markets.
In some countries with economies in transition, there are currency exchanges, responsible for the implementation of the exchange rates for businesses and market-based exchange rate. The state usually actively regulates the level of the exchange rate, using a compact stock market.
Companies engaged in foreign trade
Companies participating in international trade have a strong demand for foreign currency (importers) and the offer of foreign currency (exporters). In doing so, these organizations direct access to foreign markets, as a rule, do not have and carry out conversion and deposit transactions via commercial banks.
Investment Funds
These companies provided various kinds of international investment, pension, mutual funds, insurance companies and trusts are implementing a policy of diversified management of the portfolio of assets by placing funds in securities of governments and corporations in various countries. The most famous fund "Quantum"; George Soros conducting successful currency speculation.
For this type of firms are also major international corporations engaged in foreign manufacturing investment: the creation of subsidiaries, joint ventures, etc., such as Xerox, Nestle, General Motors and others.
Brokerage houses and businesses
In addition to banks, an active participant in the market were brokerage houses, serve as an intermediary between a large number of banks, funds and commission houses, dealing centers, etc. They, like banks, not only transactions on sales of currency prices, which expose other active participants, but also offer their own prices. Thus, they actively influence the process of pricing and the lives of the entire market, so they are called market-meykerami (market makers).
As a function of brokerage firms and companies are bringing the buyer and seller of foreign currency and the implementation of their conversion operations. During his mediation brokerage firms charge a brokerage commission. At Forex usually no commission as a percentage of the amount of the transaction, or as a pre-specified a certain amount. Typically, dealers brokerage company is listed on the exchange spread, which had already laid their commission.
Brokerage firm, has requested information on courses, is a place where a real exchange rate is already on the transaction. Commercial banks given the current level of satisfaction from the brokerage firms.
Among brokerage firms in the international currency markets, the most famous such as Lasser Marshall, Harlow Butler, Tullett and Tokio, Coutts, Tradition, and others.
Private individuals
Individuals who hold a wide range of non-trade transactions in foreign tourism, remittances, pensions, fees, buying and selling foreign currency. This is also the largest group of conducting monetary transactions with speculative purposes. In contrast to the active participants, passive participants in the market can not make their own quotes and make buying and selling currencies at prices that offer the active market participants. Passive market participants generally have the following objectives: payment of export and import contracts, foreign manufacturing investment, the opening of overseas branches or joint ventures, tourism, speculation on rate differentials, hedging currency risks, etc.
If the active participants in transactions with large amounts to several million dollars, the passive participants can use rychagovuyu or margin trading, where with a small deposit insurance, they can temporarily operate the capital, hundreds of times over this deposit. This method allows you to trade to participate in the currency market to small investors with little capital and thus receive a significant profit
Composition of the major market participants indicates that this market is being actively used "serious business" for serious purposes. Ie not all market participants are using FOREX for speculative purposes. As we have said, changes in exchange rates could lead to huge losses when eksportnoimportnyh operations. Attempts to protect itself against currency risks forcing exporters and importers to apply for those hedging instruments or the currency market: forward contracts, options, futures, etc. Moreover, even the business, which is not related to the export-import operations, may incur losses of exchange rate changes. Therefore, the study FOREX - the mandatory component of any successful business.
International Monetary Market, which is now to be known as FOREX, has deep-old roots. It goes back to thousands of years BC, when Egypt's first coinage. Sami currency exchange operations in their current understanding began to evolve in the Middle Ages. This was linked to the development of international trade and navigation. The first valyutchikami are Italian menyaly that earned on the exchange rates of different countries.
With the development of interstate relations market for currency exchange operations mutate, acquiring an increasingly shape. The most significant change in the currency market have been made in the twentieth century. Finding the market advanced features started in 70 of the 20 th century, when it was lifted system of fixed rates of one currency against another.
After the lifting of restrictions on currency fluctuations, there's a new kind of business, which is based on a profit in a free system of exchange. And the change of course caused all kinds of market conditions and is regulated only by demand and supply.
30-s XX century
The world financial crisis.
There is the destruction of trade and economic ties. A thing of the past times, the rule of gold coin standard. By the mid-30's London becomes the world's financial center. British pound sterling at that time was the main currency for trade transactions and the establishment of foreign exchange reserves. Even then pound jargon called "Cable" ( "cable"). This name is linked with the fact that the means of communication with the transactions was the telegraph, and information transmitted by cable.
In 1930, the Swiss city of Basel was established Bank for International Settlements. The goal was the creation of financial support for newly independent States and is experiencing balance of payments deficit. Before the First World War, there was a so-called "gold standard". Gold has all the features of money, and paper money freely exchanged for gold, according to the guidelines listed on their official gold content. Therefore, difficulties in establishing the exchange rate does not arise. They were based on a gold parity. This mechanism could operate only in conditions of free sale of gold at a fixed price and with no restrictions on its export. This is in full prior to the First World War.
Arose during the First World War, inflation has made it impossible to maintain razmena exchange for gold and led to the collapse of the "gold standard". In the short time it was revived in 1920-ies. modified, urezannom form. The world economic crisis of 1929-1933 biennium. and it led to the collapse. Thus, in 1931, Britain was forced to cancel the "anchor" the pound sterling to gold. A period of devaluations, periodic adjustments to the parities of currencies, strengthening foreign exchange controls and import restrictions.
1944
In the U.S., was the Bretton Woods conference. It is believed the end of the US-British rivalry. The conference was attended by two major figures: John Maynard Keynes (England) and Harry Dexter White (USA). They managed to create and adopt a new order for the world financial system under the circumstances.
Bretton Woods monetary system, established in 1944. Was designed to combine the hardness inherent in the gold standard and flexibility, differentiating system oscillating courses. There was an official gold content of the national currencies of participating countries, and through it to identify each other parities of currencies. In doing so, the obligation to exchange paper money for gold were recorded. Participating countries Bretton Woods agreement had decided not to reject the exchange rate parity of the value of + / - 1%. Automatic alignment of the balance of payments should have been done by changing income and prices in response to changes in foreign exchange reserves. Only in the case of a "fundamental imbalance" was to change parity.
In accordance with the Bretton Woods agreement, the United States to guarantee the exchange of its currency to gold at a fixed rate, but to bring dollars to the amount could only central bank of another country. In addition, it is seen as a "nedruzhestvennaya" to the U.S. action and has very rarely. However, French President de Gaulle S. manner successfully added to gold reserve in France.
The main provisions of the Bretton Woods system
The International Monetary Fund has become a vital institution that monitors international financial and economic relations;
Declared currency, playing the role of international reserves (the dollar and the de facto pound);
There are adjustable parities of currencies to the U.S. dollar (possibly rejecting - 1%), the dollar is pegged to gold (ounce of gold - $ 35);
IMF members have the right to change the parities only with the consent of the IMF;
Upon completion of the transition period should be a convertible currency, for the observance of the principle of all governments commit themselves to keep international reserves and, if necessary - to carry out intervention in currency markets.
Members of the IMF makes a contribution currency and gold.
1947
For the suspension of communism, the U.S. reconstruction program are the European economy. U.S. Secretary of State Marshall, in his report obrisovyvaet plan, under which the economy of Europe ozdorovitsya to a level where it can maintain its own military capabilities. One of the challenges is utolenie "dollar famine". When in 1949 the U.S. dollar liabilities Europe accounted for 3.1 billion, then in 1959 they reached 10.1 billion dollars.
In the 60 years have been detected weakness of this system, a tendency to accelerate the pace of inflation and increasing disparities in the rates of different countries. This has led to periodic review parities. Although the Bretton Woods system and is considered an example of solid fixed-rate for the period from 1948 to 1967. currencies have changed 109 countries. The average depreciation rate was 48.2%. At least 48 countries carried out for two and a devaluation of their currencies. By 1958, most European countries declared free convertibility of their currencies.
1964
Japan announced the convertibility of its currency. Following the announcement of the convertibility of the major currencies, it became clear that the U.S. is no longer able to maintain the price of $ 35 per ounce of gold. The dollar, inflation is a threat to the United States. The Kennedy administration has taken a number of misconceptions action - imposing a tax on the interest differential, raising the cost of foreign borrowing, and a program of voluntary restrictions on foreign loans. Tax and restrictions have led to the emergence of a new market - the market evrodollarov.
1967
A devaluation of the English pound, which has caused the latest blow to the illusory stability of the Bretton Woods system.
1970
In the U.S., sharply declining interest rates, creating a dramatic crisis of the dollar. Within a short period of time going on a massive outflow of capital from the U.S. to Europe, where interest rates were higher.
May 1971
Germany and the Netherlands announced a temporary free-floating its currency.
August 1971
Inflation has swept, and the U.S.. U.S. balance of payments deficit leads to a reduction in gold from 18 to 11 billion dollars. At the same time, a rise in U.S. external debt. The market price of gold has become more than a fixed, and the U.S. can not artificially support it. Growth deficits forced the U.S. to suspend the convertibility of dollars in gold. August 15, 1971, U.S. President Robert Nixon eliminated between gold and the dollar link, and the U.S. currency lost its support.
December 1971
It was decided that the devaluation of the dollar (the first post-war period, but not the last). At a meeting in the Smithsonian Institution in Washington was a last attempt to save the Bretton Woods system. Interval deviations from parity exchange rates had been raised to 4.5%. To keep the border interval, it was very difficult. And some time later the Bundesbank held intervene in the amount of 5 billion dollars. It was a huge sum in those times, but it has not brought success. Currency markets in Europe and Japan had to be temporarily closed, while the U.S. announced the devaluation of the dollar by 10%. Developed countries have ceased to maintain a fixed parity and let currency swimming.
1973-1974
U.S. to progressively abolish the tax on interest differential and a program of voluntary restrictions on foreign loans. Bretton Woods system has ceased to exist. Since March 1973. regime of floating exchange rates is predominant.
In the last years of the Bretton Woods system of currency traders will benefit a great speculative profits in the period followed the termination of intervention of central banks. After the rejection of the possibility of extracting the fixed rate of return that have been severely limited. Many banks have suffered major losses, and two well-known - "Bankhaus Hershtadt" in Colon and Frenklin National in New York - even gone bankrupt because of failed speculation.
1976
A Jamaican Conference (in Kingston). Representatives of the world's leading states have established new principles of the world monetary system, including a shift to floating rates. States renounced the use of gold as a means to cover the deficit in international payments. The main elements of the new system are inter-state organizations, regulating foreign relations, currency convertibility. Means of payment in favor of national currencies. The main mechanism by which the international currency transactions are commercial banks.
1978
A European Monetary System (EMS). The core of EMU is a grid of cross-currency exchange rates with the central and boundary values of exchange rates. On the whole, the EMU reminds Bretton Woods. If the cross-rate closer to the border, both sides are obliged to conduct an intervention.
A key currency EMU - doychmarka.
1985
Gradually, the ECU is not counting, and physical instrument. Produced ECU-denominated traveler's checks and credit cards, banks offer deposits in the ECU.
The history of European unification
1957
In Rome, an agreement was signed on the formation of the European Economic Community. In the Community include: West Germany (FRG), France, Italy, the Netherlands, Belgium, Luxembourg.
1963
Chancellor Konrad Adenauer and President Charles de Gaulle signed a cooperation agreement between West Germany (FRG) and France.
1969
A meeting of EU leaders, which were set guidelines for a future monetary union within the European Economic Community.
1972
After the collapse of the Bretton Woods system of exchange rates of EU leaders signed the European agreement on the free swimming. For the European currencies were set limits fluctuations in their value relative to each other in the amount of 2.25%.
Collective fluctuation euro against the U.S. dollar was allowed in the amount of 4.5%.
1973
Britain, Ireland, Denmark became members of the European Agreement on the free swimming.
1978-79
Education the European Monetary System. The agreement establishing it was ratified by 9 parties - members of the European Community. The purpose of the establishment of EMU - an attempt to protect the currency of the Member States of the EEC sharp currency fluctuations.
Of the 9 signatories, only 7 have been full members: West Germany (FRG), France, the Netherlands, Belgium, Luxembourg, Denmark, Ireland. Britain did not participate in all documents, Italy joined them on certain conditions.
Simultaneously with the establishment of EMU has introduced a new currency - the ECU. The objective - the establishment of a means of payment within the EMU, and in due course - the replacement of national currencies. ECU was a basket of currencies stranuchastnits EMU. For the national currencies have been set limits on the fluctuations of the central values of 2.25%, for the Italian lira - 6%.
1981
On the European Monetary System joined Greece.
1986
In the European Monetary System will enter Spain and Portugal. For the Spanish Pesetas limits had been placed on the variation in the amount of 6%.
1990
Britain joined the exchange-rate mechanism, which was developed in the framework of EMU, with the pound sterling against the German mark to 2.9500. West Germany (FRG) and East Germany (GDR) have joined together in a unified Germany.
February 1992
In the Dutch city of Maastricht 12 Member States of the European Monetary Union signed a new Treaty on European Union. At the core of the treaty was based on the Rome Agreement of 1957. In the Maastricht Treaty had been scheduled orientations of the single European market, the European Central Bank, the single currency, common economic policy.
September 1992
Heavy times for the European currencies. There was the famous fall of the pound sterling. During the aggressive sales of pounds in the foreign exchange market the Bank of England and other members of the exchange rates were trying to keep it in an acceptable range of fluctuations in support of operations in the market. But all their efforts have not led to the desired result. Then the Bank of England was forced to raise the discount rate three times in one day in the amount of 5% in an attempt to prevent podeshevlenie pound. But the measure does not help, and pressure on the pound continued.
The famous financier George Soros was famous for the fact that playing podeshevlenie pounds and received a huge profit when he saw that the pound would not be able to keep within the established framework of exchange-rate mechanism.
Thus, the Bank of England was forced to withdraw its currency from the mechanism of exchange rates. The fate of the British pound and Italian lira divided. It was announced that they had temporarily come out of the mechanism of exchange rates.
July 1993
Out of the pound sterling exchange rate mechanism strongly influenced the movement of European currencies. All currency felt the intense pressure that has led to significant movements in the direction of their podeshevleniya. An interesting story happened with the French franc. After the devaluation of European currencies French franc remained the last bastion of stability. And then the whole market came to him in the hope that it should understand the plight of other currencies.
Remembering signed a bilateral cooperation agreement, Germany could not leave the franc at rasterzanie. Not only that Bundesbankprinimal involved in interventions in the currency market, but also for the maintenance of the franc, it was done lowering German interest rates. But even such selfless actions have not been able to save the franc from heavy podeshevleniya.
Due to such grand events in the currency market, in the mechanism of exchange rates, it was decided to increase the range of possible fluctuations of its currency to 2.25% and 6% to 15%.
December 1995
European leaders agree to introduce the euro in 1999 for countries that meet certain parameters for the largest government deficits, public debt, inflation and interest rates.
December 1996
Determine the appearance of euro banknotes.
June 1997
Determine the appearance of euro coins and euro-cents.
March 1998
The European Commission recommends a list of 11 countries that will enter the euro: Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Ireland, Portugal, Spain, Austria, Finland.
May 1998
European Parliament approves the choice of 11 countries that will enter the European Monetary Union with the new euro currency. It starts with the choice of candidates for the post of head of the European Central Bank.
January 1999
The market for non-cash transactions and quotes a new European currency euro, which replaced the ECU. 11 European countries recorded exchange rates against the euro. The European Central Bank began to manage the monetary policy of the European Monetary Union (EMU).
Euro (EUR) "became the official currency for 12 EU countries. In the euro area are:
* Germany
* France
* Italy
* Belgium
* Netherlands
* Luxembourg
* Spain
* Portugal
* Greece
* Austria
* Finland
* Ireland.
Britain, Sweden and Denmark have not yet participated in the euro zone.
Rate, foreign exchange each of the countries - members of the EMU in the euro, with the exception of Greece, was fixed 1 January 1999 (see Table 1), while, since that date, each of these currencies ceased to exist as an independent currency. Course conversion drachmas to the euro was fixed on 1 January 2001. Prior to the completion of the conversion of funds in the euro on 1 January 2002, the national currency (HB) existed as subunits of the euro.
Starting from 0.00 in the European time, 1 January 2002 Euro officially became a cash turnover of 12 EC, and the national currencies of the euro zone ceased to exist.
The concept of market FOREX, liquidity
Table 1. Fixed exchange rates of participating European Monetary Union to the Euro:
1 euro = 13.7603 Austrian schillings
= 40.3399 Belgian francs
= 1.95583 German marks
= 5.94573 Finnish markka
= 6.55957 French franc
= 340.750 Greek drachma
= 0.787564 Irish pounds
= 1,936.27 Italian lire
= 40.3399 Luxembourg francs
= 2.20371 Dutch guilders
= 200,482 Portuguese escudos
= 166.386 Spanish Pesetas
International Monetary Market, or market FOREX (Foreign Exchange, or FX), - this is the market exchange (conversion) operations, sales, accounts and granting loans to foreign currency on the specific conditions of the foreign exchange market between the parties. The conditions include the amount, the exchange rate and the performance of a specific date. FOREX Market was formed in 70 years the last century, after undo the Bretton Woods system of fixed exchange rate anchor. Since then, the FOREX is becoming the most dynamic and liquid market. This is the only market in the world, working around the clock, five days a week. The rapid movement of funds, the low cost of transactions, high liquidity makes FOREX one of the most attractive markets for investors.
The essential difference FOREX market from other markets is that it does not have any particular place of trade. FOREX is a huge network of currency dealers connected among themselves through telecommunications, distributed to all the world's leading financial centers around the clock and work as a single mechanism. Currency trading is carried out by telephone or via computer terminals - a transaction carried out simultaneously in hundreds of banks around the world.
The essence of client investments in the market FOREX - this is an operation of buying and selling of foreign exchange contracts in order to profit from changes in exchange rates over time. These operations are known as conversion, and they represent the transaction agents of foreign exchange market for the exchange of specified amounts of the currency of one country to another country's currency at an agreed rate and calculated on a specified date.
The daily volume of conversion operations in the world is from 1 to 3 trillion U.S. dollars. The major currencies, which account for the vast amount of all transactions in the market FOREX, are the U.S. dollar (USD), euro (EUR), Japanese Yen (JPY), Swiss franc (CHF) and the English pound (GBR). Transactions involving the U.S. dollar accounted for about 70%. The share of electronic brokers now account for many of an estimated more than 15% of the market Forex, and tends to increase rapidly.
There are a number of features and significant benefits of the FOREX market, compared with other financial markets:
1. First of all - free conversion of the world's leading currencies;
2. almost 100% I liquidity any transaction. Given the huge volume of transactions every day and every second committed to the FOREX (daily volume of transactions on the FOREX is from 1 to 3 trillion U.S. dollars), are here except where the transaction can not be executed because of lack of demand (as in crisis situations in the stock market shares and securities);
3. through margin trading system, widespread in the FOREX, market participants may be individuals with relatively small investments;
4. widely developed Internet trading system, the saturation of information space of the Internet provides access to current information and foreign exchange trading on the FOREX virtually any interested person from anywhere in the world where there is a possibility to connect to the Internet;
5. the possibility of carrying out transactions of sale of currencies in real time, almost instantly in response to operational information on changing market conditions or events.
For information about the state of financial markets in real time, as well as financial and economic news from Russian and international agencies use of international information systems, such as REUTERS, DOW JONES, CQG, BLOOMBERG, TENFORE etc. For more information on the systems we will in subsequent lectures.
Participants in the international currency market
Major participants in the currency market FOREX are:
* Central banks
* Commercial banks
* Currency Exchange
* Firms engaged in foreign trade
* Investment funds
* Brokerage company
* Individuals
Central banks
The basis of the FOREX market constitute the central banks of different countries. Their role is to manage foreign reserves, currency intervention, influencing the level of the exchange rate, as well as management level of interest rates on investments in local currency. Central banks are interested in maintaining rates at a level that is needed at this moment the economy of the country.
The biggest influence on world currency markets has the U.S. central bank - the Federal Reserve System (US Federal Reserve or FED). Then it was followed by the central banks of Germany - Bundesbank (Deutsche Bundesbank or BUBA) and British (Bank of England also called the Old Lady).
The central banks of countries entering the FOREX, as a rule, not for the purpose of making profits, and to check the stability or the correction of the existing national currency, as the latter has a significant impact on the economy. Central banks also fell on the foreign exchange market and commercial banks. Although profit is not the main purpose of these banks, their loss-making operations do not attract, so the intervention of central banks usually disguised and carried out chereh several commercial banks immediately. The central banks of different countries can carry out joint and coordinated intervention.
Commercial banks
In a large commercial banks performed the bulk of transactions on the FOREX banks holding accounts in the other market participants and be done with them the necessary conversion operations. Banks like to accumulate (through transactions with customers), the aggregate market demand for foreign currency conversions, as well as in attracting and placing funds and go with them to other banks. They operate under the direction of the exporters and importers, investment institutions, insurance and pension fonddov, hedzherov and private investors. Commercial banks in the market comply with orders for currency conversion, and lead their own operations (for speculative purposes and within the hedge investment risks). Customers of banks - are largely eksportnoimportnye companies, transactions in the foreign exchange market for the contracts, hedging (insurance) of its risks, as well as brokerage houses, serving their customers, leading speculation. In addition to meeting the requests of customers, banks can carry out operations, and independently in their own interests and at their own expense. Ultimately, the foreign exchange market is a market for interbank transactions, and, referring to the movement of exchange rates should be kept in mind the interbank foreign exchange market. At the world's largest foreign exchange markets influenced by international banks, the daily volume of transactions which are up to billions of dollars. These banks, like Barclays Bank, Citibank, Chase Manhatten Bank, Deutsche Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Bank. Some banks (eg, Union Bank of Switzerland) formed the bulk of profits from currency speculation.
Currency Exchange
Unlike the stock exchanges and markets for foreign currency transactions for a period of work of foreign exchange markets was not in a particular building, and during certain hours. The development of telecommunications technology, most major financial institutions in the world use the services markets directly and through intermediaries around the clock. Most major world stock exchanges are London, New York and Tokyo exchange markets.
In some countries with economies in transition, there are currency exchanges, responsible for the implementation of the exchange rates for businesses and market-based exchange rate. The state usually actively regulates the level of the exchange rate, using a compact stock market.
Companies engaged in foreign trade
Companies participating in international trade have a strong demand for foreign currency (importers) and the offer of foreign currency (exporters). In doing so, these organizations direct access to foreign markets, as a rule, do not have and carry out conversion and deposit transactions via commercial banks.
Investment Funds
These companies provided various kinds of international investment, pension, mutual funds, insurance companies and trusts are implementing a policy of diversified management of the portfolio of assets by placing funds in securities of governments and corporations in various countries. The most famous fund "Quantum"; George Soros conducting successful currency speculation.
For this type of firms are also major international corporations engaged in foreign manufacturing investment: the creation of subsidiaries, joint ventures, etc., such as Xerox, Nestle, General Motors and others.
Brokerage houses and businesses
In addition to banks, an active participant in the market were brokerage houses, serve as an intermediary between a large number of banks, funds and commission houses, dealing centers, etc. They, like banks, not only transactions on sales of currency prices, which expose other active participants, but also offer their own prices. Thus, they actively influence the process of pricing and the lives of the entire market, so they are called market-meykerami (market makers).
As a function of brokerage firms and companies are bringing the buyer and seller of foreign currency and the implementation of their conversion operations. During his mediation brokerage firms charge a brokerage commission. At Forex usually no commission as a percentage of the amount of the transaction, or as a pre-specified a certain amount. Typically, dealers brokerage company is listed on the exchange spread, which had already laid their commission.
Brokerage firm, has requested information on courses, is a place where a real exchange rate is already on the transaction. Commercial banks given the current level of satisfaction from the brokerage firms.
Among brokerage firms in the international currency markets, the most famous such as Lasser Marshall, Harlow Butler, Tullett and Tokio, Coutts, Tradition, and others.
Private individuals
Individuals who hold a wide range of non-trade transactions in foreign tourism, remittances, pensions, fees, buying and selling foreign currency. This is also the largest group of conducting monetary transactions with speculative purposes. In contrast to the active participants, passive participants in the market can not make their own quotes and make buying and selling currencies at prices that offer the active market participants. Passive market participants generally have the following objectives: payment of export and import contracts, foreign manufacturing investment, the opening of overseas branches or joint ventures, tourism, speculation on rate differentials, hedging currency risks, etc.
If the active participants in transactions with large amounts to several million dollars, the passive participants can use rychagovuyu or margin trading, where with a small deposit insurance, they can temporarily operate the capital, hundreds of times over this deposit. This method allows you to trade to participate in the currency market to small investors with little capital and thus receive a significant profit
Composition of the major market participants indicates that this market is being actively used "serious business" for serious purposes. Ie not all market participants are using FOREX for speculative purposes. As we have said, changes in exchange rates could lead to huge losses when eksportnoimportnyh operations. Attempts to protect itself against currency risks forcing exporters and importers to apply for those hedging instruments or the currency market: forward contracts, options, futures, etc. Moreover, even the business, which is not related to the export-import operations, may incur losses of exchange rate changes. Therefore, the study FOREX - the mandatory component of any successful business.
