DIKSHA GUPTA F-15

GOVARDHAN JILLA F-17

AKASH K F-18
SURBHI F-19
SUKHI F-20
WHAT IS CURRENCY MARKET

 Currency market is the market in which national

currencies are traded for one another. Market in
which foreign currencies are bought and sold.

 Major participant in this market are commercial

bank, forex broker, & authorized dealers

 Besides, transfer of funds form one country to

another speculation is important dimension of
Currency market.
WHAT IS EXCHANGE RATE ?

 A foreign exchange rate is the price of the

domestic currency stated in terms of another
currency.

 Example :
$1 = Rs. 71
1 Euro = Rs. 80.78
1 yen = Rs. 0.63
TYPE OF EXCHANGE RATE SYSTEM
Fixed Exchange Rate

 Fixed exchange rate system refers to a system in

which exchange rate for a currency is fixed by the
government.
 The country makes sure that its value against
the dollar, or other important currencies, remain
the same.
 For example, China & Hong Kong maintains a
fixed rate.
TYPE OF EXCHANGE RATE SYSTEM
Floating Exchange Rate
 Flexible or Floating exchange rate systems are
ones whereby the rate of a currency is
determined by the market forces of demand and
supply.

 The central bank of the country may interfere in

economically extreme situations such as the
recession or boom to stabilize the currency.
 For example: India maintains use floating
exchange system.
FORWARD EXCHANGE RATE
 A forward rate is a one that is determined as
per the terms of a forward contract. It stipulates
the purchase or sale of a foreign currency at a
predetermined rate at some date in the future.

 The forward rate is quoted at a premium or

discount to the spot price.

 A forward contract freezes the rate of exchange

for both the parties and thus eliminates the
element of uncertainty.
SPOT EXCHANGE RATE
 The spot rate is the current exchange rate for any
currency. It is the rate at which your currency shall
be converted if you decided to execute a foreign
transaction “right now”.

 Trading at a spot rate does not require deep

mathematical or statistical analysis. It is what it
is.

 Spot rates can be a misleading indicator in times of

economic crisis, unreasonable demand or supply
patterns or temporary transitional phases in an
economy.
FACTOR INFLUNCE EXCHANGE RATE
FOREIGN EXCHANGE MARKET IN INDIA

 The foreign exchange market in India started when

in 1978 the government allowed banks to trade
foreign exchange with one another.

 The Foreign Exchange Management Act, 1999 or

FEMA regulates the whole Foreign Exchange
Market in India.

 Before FEMA , the foreign exchange market in

India was regulated by the Reserve Bank of India
through the Exchange Control Department, by the
Foreign Exchange Regulation Act or FERA, 1947.
FOREIGN EXCHANGE MARKET IN INDIA
 Prior to 1992, Government of India strictly
controlled the exchange rate. After 1992,
Government of India slowly started relaxing the
control and exchange rate became more and more
market determined.

 A major step in development of Indian forex market

happened in 2008, when currency futures (Indian
Rupee and US Dollar) started trading at National
Stock Exchange (NSE).
STRUCTURE OF CURRENCY MARKET

Main Stakeholders in Market

 Traders Traders are generally all individuals in the

public who are also corporate customers of the
banks. These customers use the banks as authorized
dealers to access the forex market.
 Banks /Authorized dealers The banks, on the other
hand, are the legally authorized institutions to
handle currency.
 Reserve bank of India is the central financial
institution which is responsible for the monetary
policy in India.
THANK YOU