MAF101 - Fundamentals of Finance - Foreign Exchange - Spot and Forward FX Contracts - Finance Assignment Help

Assignment Task

The main functions of foreign exchange (FX) markets are:
to facilitate cross-currency payments arising from imports, exports and financing flows 

to reveal the value of currencies 
to allow traders to manage their FX risks
We consider the wholesale FX market it is by far the largest financial market when valued by turnover

The Australian FX Market:

This is the FX trading that is conducted in Australia wholesale and OTC
A dealer is an organisation, such as a major bank, that has been licensed by ASIC to trade in FX. The market has two segments:
dealers trading with counterparties; and
inter-dealer trading (this allows dealers to manage their inventory).

FX markets never close
24/7 global FX trading
In the Pacific and Southeast Asia:
trading in our time zone
Australian FX market is among the ten most active marketsin the Asia-Pacific region, along with Singapore and Hong Kong  A/PAC markets operate when London and the US markets have closed
 

Prior to 1970, most countries adopted a fixed exchange rate system currency value was fixed (pegged) in terms of another currency,usually US Dollar (USD) or British Pound (GBP).
If demand for currency increases (decreases),government must sell (buy) currency to maintain fixed rate. Fixed exchange rates allowed a currency to be stable for long periods, but would eventually need a large adjustment, which was unsettling for the economy.

Domestic currency per unit of foreign currency  foreign currency is the commodity currency; and domestic currency is the terms currency.
AUD/USD = 0.9595 is direct quote in New York, USA
USD/CAD = 1.2510 is direct quote in Vancouver, Canada

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