This term refers to a condition where the relationship between interest rates and the spot and forward currency values of two countries are in equilibrium. As a result, there are no interest rate arbitrage opportunities between those two currencies. |||As an example, assume Country X's currency is trading at par with Country Z's currency, but the interest rate in Country X is 6% and the interest rate in country Z is 3%. All other things being equal, it would make good sense to borrow in the currency of Z, convert it in the spot market to currency X and invest the proceeds in Country X. However, in order to repay the loan in currency Z, one must enter into a forward contract to exchange the currency back from X to Z. Covered interest rate parity exists when the forward rate of converting X to Z eradicates all the profit from the transaction.
A forward contract in the forex market that locks in the price at which an entity can buy or sell a currency on a future date. Also known as "outright forward currency transaction", "forward outright" or "FX forward". |||In currency forward contracts, the contract holders are obligated to buy or sell the currency at a specified price, at a specified quantity and on a specified future date. These contracts cannot be transferred.
A set of analyses that the forex day trader uses to determine whether to buy or sell a currency pair at any given time. The day trader's currency trading system is usually made up of a number of currency day trading signals, which are based on technical analysis charting tools or fundamental, news-based events. |||Currency day trading systems can be either manual or automated. A manual system involves a trader sitting at the computer screen, looking for signals and interpreting whether to buy or sell. In an automated trading system, the trader "teaches" the software what signals to look for and how to interpret them. It is thought that automated trading takes the detrimental human element of psychology out of trading.Both automated and manual day trading systems and signals are available for purchase over the internet. It is important to note that there is no such thing as the "holy grail" of trading systems. If the system was a perfect money maker, the seller would not want to share it.
The ease with which a country's currency can be converted into gold or another currency. Convertibility is extremely important for international commerce. When a currency in inconvertible, it poses a risk and barrier to trade with foreigners who have no need for the domestic currency. |||Government restrictions can often result in a currency with a low convertibility. For example, a government with low reserves of hard foreign currency often restrict currency convertibility because the government would not be in a position to intervene in the foreign exchange market (i.e. revalue, devalue) to support their own currency if and when necessary.
A note that grants the holder the right to convert a specific amount of one currency to another at a given exchange rate until it expires. A currency certificate is a bearer certificate in that there is no registered owner. Currency certificates are a useful tool for hedging foreign exchange risk. |||For example, suppose that Company XYZ is based in America but also has operations in Canada. The company will be receiving Canadian dollars from sales, but will want them to be exchanged for U.S. dollars. If the U.S. dollar weakens relative to the Canadian dollar, the company will lose money. Each month, Company XYZ forecasts the next month's Canadian sales. The company could purchase one-month currency certificates for the amount of next month's estimated Canadian sales at a foreign exchange rate specified today. This will protect the company if the Canadian dollar appreciates relative to the U.S. dollar, because it can turn in these certificates and convert the currency at the note's specified rate. If the U.S. dollar appreciates relative to the Canadian dollar, the certificates will not be used.
A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used. |||Here's an example of a "yen carry trade": a trader borrows 1,000 Japanese yen from a Japanese bank, converts the funds into U.S. dollars and buys a bond for the equivalent amount. Let's assume that the bond pays 4.5% and the Japanese interest rate is set at 0%. The trader stands to make a profit of 4.5% as long as the exchange rate between the countries does not change. Many professional traders use this trade because the gains can become very large when leverage is taken into consideration. If the trader in our example uses a common leverage factor of 10:1, then she can stand to make a profit of 45%. The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the U.S. dollar were to fall in value relative to the Japanese yen, then the trader would run the risk of losing money. Also, these transactions are generally done with a lot of leverage, so a small movement in exchange rates can result in huge losses unless the position is hedged appropriately.
A monetary authority that makes decisions about the valuation of a nation's currency, specifically whether to peg the exchange rate of the local currency to a foreign currency, an equal amount of which is held in reserves. The currency board then allows for the unlimited exchange of the local, pegged currency for the foreign currency. A currency board can only earn the interest that is gained on the foreign reserves themselves, so those rates tend to mimic the prevailing rates in the foreign currency. |||Like most of the world's developed economies, the United States does not have a currency board. In the U.S., the Federal Reserve is a true central bank, which operates as a lender of last resort, engaging in forward contracts and trading Treasury securities in the open market. The exchange rate is allowed to float, and is determined by market forces as well as the Fed's monetary policies. By contrast, currency boards are rather limited in their power. They essentially hold the required percentage of pegged currency that has been previously mandated, and exchange local currency for the pegged (or anchor) currency, which is typically the U.S. dollar or the euro.
A currency trade that offers an all-or-nothing payoff based on a given currency exchange rate when the position reaches its expiration date. Binaries have a single payoff amount rather than the variable profit amounts found in traditional options. Binary trades can be used for either hedging purposes (such as downside protection for assets held in a specific currency) or as a speculative bet on the direction a specific exchange rate will move. The going premium on a currency binary represents the consensus "odds" that the strike exchange rate will be reached by expiration. An investor or trader can also sell (short) a currency binary position, reversing the payoff options and effectively betting that the exchange rate will fall. |||Currency binaries represent a rather young trading strategy, and not all currency exchange rates are currently being traded. The majority of positions are for the EUR/USD, GBP/USD and USD/YEN based on their very liquid forex markets. For example, assume that the exchange rate for the EUR/USD is currently 1.25; an investor who buys a currency binary at a strike exchange rate of 1.30 is betting that the exchange rate will be 1.30 or greater on the expiration date. If this occurs, the investor will receive a set payoff amount, no matter how far above 1.30 the exchange rate settles. If the exchange rate at expiration is less than 1.30, the long investor receives nothing.
登录
工商服务
危机公关
金融律师
app开发
财税服务
金融牌照
网站建设
知识产权
企业征信
审计评估