FOREX

• Global market for currencies
• Decentrialised
• 5 days/week, 24 hours
• World largest markets
• $6.6 trillion / day
• Managing foreign exchange for PROFITABILITY AND LIQUIDITY
• Appreciation & Depreciation

Currency moment is critical in business strategic planning and control.

• Interprate exchange rate
• Understand how it works
• Use tools to manage currencies

History

• Bretten Woods Agreement - Gold was the basis of the U.S. dollar
• Gold Standard - Gold became the fixed money unit
• FIAT Currencies - Money not backed by any commodities
• US Dollar - Petrodollar - US Dollar is backed by petrol

HARD CURRENCIES:

• US Dollar (USD)
• Euro (EUR)
• British Pound Sterling (GBP)
• Japanese Yen (JPY)
• Swiss Franc (CFH)

What do traders do?

• Use the exchange rates to their advantage
• Predict economic events to buy low and sell high
• Currencies are determined by supply & demand

What are currencies ?

• Value = comparison of one currency with another currency with the exchange rate (EUR/USD)
• Currencies don't fall/rise independtly of another other
  • If dollar crashes, euro increases

Bid & Ask Prices

Bid Price -> buy a specific pair from you (YOU SELL TO THEM)

Offer Price -> sell a specific pair to you (YOU BUY FROM THEM)

Bid/Offer spread -> difference between buying price and selling price

Affected by

• Economic policy- fiscal policy - monetary policy
• Economic conditions- Inflation = high -> > DEPRECIATION - Inflation = lower -> APPRECIATION - Interest rates = lower -> MORE BORROWING , and therefore more spending which increases inflation - Interest rates = higher -> LESS BORROWING, and therefore less spending which decreases inflation - Political stability - Market psychology

Interest rates

• GDP growth rates
• Inflationary trends
• Agricultural output
• International trade balance
• Exchange rate policies
• Capital market shares
• CPI (Consumer Price Index)
• Retail Sales
• Supply & Demand

Political stability and turmoil

• Wary of politically unstable countries
• Pulling money from a country -> depreciation
• Investing in stable countries
• US Dollar = "safe-heaven"
• US Dollar does not depreciate even during turmoil

Market Psychology

• Investors invest depending on one's behavior
• Results in market being OVERSOLD OR OVERBOUGHT