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.
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