Foreign Exchange Market

Foreign Exchange Market

Foreign exchange market refers to a market environment which currencies from various countries are traded. The trade which takes place in any market environment experiences various rates. For a trader to be successful, they have to be keen on what is happening in the world market (Kalman, Makay & Toth, 2016). Exchange rates are dependent on the system of currency which the trade is involved in. Several FX rates exist in the world markets.

There exist the differing financial instrument rates. Exchanges related to cash, check and credit cards have varied rates. High exchange rates are placed for instruments that need more processing. A good example is the cash transaction which is found to have a lower rate of exchange as compared to checks which have a longer waiting time. There also exists the spot rate which is mostly used by investors and travelers. The rate applies to immediate trade cases. The third exchange rate is the forward rate. This kind of exchange rates is planned on a present timing but is to take place in the future. The forward rates are an advantage because the traders get a chance to evade any possible fluctuations leading to losses in the market. The fourth rate is the multiple rates. This involves the application of various rates of dependence to various entities involved.

The New Zealand dollar future is my selection. It involves the New Zealand dollars and US dollars. The contract expiration is after six months. The minimum price is $.0001 for every New Zealand dollar increment. The spot price as at the moment is 0.6937. From the illustration, the future price is expected to reduce by 0.16%.

Reference

Kalman, P., Makay, E., & Toth, D. (2016). Foreign Exchange Market. MNB Handbook, 1(7), 1-56.

Module: What is FX – CME Institute [Video file]. (n.d.). Retrieved from https://institute.cmegroup.com/modules/what-is-fx

FX Products – CME Group. (n.d.). Retrieved from http://www.cmegroup.com/trading/fx/#featured

Currencies. (n.d.). Retrieved from https://www.bloomberg.com/markets/currencies

 

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