How to make money in Foreign Currencies using Fibonacci Retracements and Fibonacci Profit Targets. Brought to you by www.LeverageFX.com
Originally posted 2009-11-07 05:43:23. Republished by Old Post Promoter
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Yes! You keep hearing about those tips, software application and FX experts helping you out to build the finest forex strategy. But let me tell you one big secret! To making sure you have built the most solid forex strategy, you need to understand the forex market from the deeper core. This article helps you on that by explaining some twists and curves of forex market. Enjoy!
Nevertheless, it is the leviathan large international banks holding the heart of forex market. Banks worldwide (between 100 and 200) actively participate to “compose a market” international market of forex. Putting it the other way around, “they’re always on their toes” for buying or selling foreign currencies for their individual accounts. That is pretty much comparable to a specialist working hard on NYSE’s floor.
Those international banks dish up their retail clientele, large exporting/importing corporations, when it comes to foreign commerce. These banks as well help large corporations in making international investments on financial assets, which call for foreign exchange.
They have significant role to play on foreign bonds or foreign stocks. Other clientele of these large banks are MNCs, money managers, or non-bank dealers. It indeed is a huge world out there. Bank supported forex transactions amount to as much as 14% of the entire forex trading amount globally. Along those lines, the other part of trading quantity comes from Inter-bank traders – usually among international banks and/or nonbank dealers.
No wonder it’s called the biggest casino ever!
As you might understand, the size as well as frequency of underlying trades turns out to be super cost effective for all parties involved. And that is how they’ve been able to compose their separate dealing rooms for executing direct trades within inter-bank forex market.
Originally posted 2009-11-07 07:54:07. Republished by Old Post Promoter
Popularity: 58% [?]
Everybody knows that the majority of the microfinance institutions are running in under-developed or developing countries, which are characterized by high risks regarding currency depreciation or debt restructuring. Such jeopardy keeps occurring periodically. So they’re especially exposed to the risk of forex rate fluctuations.
Recently a CGAP survey found that 50% of the MFIs have zero protection mechanisms against such risks. Yet, they’re as well indicating an overall lacking in their understanding regarding forex risks and/or the degree to the MFIs are vulnerable to those risks.
Thus researchers keep seeking ways to raise awareness among those people regarding the risk of forex rates in microfinance sectors. They are ready to provide them with brief overviews of a variety of components related to those risks. Secondly, if you look at the recent techniques employed by most microfinance institutions (or MFIs) and/or investors managing such risks, it will become clear how urgent it is to clarify to them the strategies of mitigating and avoiding exposures to such exchange risk.
The first category of risk however arises within microfinance arena whenever an MFI ends up acquiring debt in any foreign currency (typically USD and/or EUR) and after that on-lends within any domestic currency (or DC). Since after that, the MFI comes with a liability in hard currency, while it’s assets remain in DC, it all results in a horrible “currency mismatch” – which refers to a fluctuation in terms of those 2 currency’s relative values. Such miss matches might threaten the institution’s financial viability.
And finally, transfer risk refers to that risk that arises when the government forbids people from sending any particular currency out of the country, disregarding which source it came from.
In both of these latter cases, the MFI does have the right to make payments with hard currencies, but they’re not allowed to make those payments in real world, since there are a number of restrictions that the governments impose on them.
Nevertheless, there’re multiple options for these organizations which are exposed to risks of forex rate. Whatsoever, “hedging” happens to be among the most popular options. As you might know, it involves using some special hedging instruments against those risks. Among those instruments, forward contracts are most notable. They are special agreements for exchanging or selling foreign currencies at a pre-set price at some point.
Another instrument is called ‘swap’. It is another special agreement that involves simultaneous exchanging or selling of a particular sum of any foreign currency at the present and reselling or repurchasing that currency on a future date. And finally, you might have heard of ‘options’, which are special hedging instruments providing you with the option of buying or selling a particular foreign currency on a future date.
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