Forex Sector Presentation

By Stefan Mihailescu
And
Hu Yi
23rd of November 2010
 Agenda

• 1. Currency trading example

• 2. Market news and developments
• 3. Current Positions :
a) Forex dealing form
b)Adjustments and outcomes
 Currency trading example
• Example: EUR/USD buy 1.4232 sell 1.4230
Amount Value
10.000 units 1Pip = 1$
100.000 units 1Pip=10$

Margin 1:50; 1:100

Trade Value/50; (10.000* 1.4232or30)/50 = ~284
Trade Value/100 (10.000* 1.4232or30)/100 = ~142

The margin is the amount of (equity), 272 while the rest (multiplier of 50 or
100) is the leverage.
 Currency trading example
Most Trading accounts will compound interest daily.
-if you borrow the lower yielding currency and you lend the higher yielding currency
then you receive the interest difference.
-if you borrow the higher yielding currency and you lend the lower yielding
currency then you are deducted the interest difference

Example: interest rates US 1% and GBP 1.5%

You borrow US$ (lower) and then lend GBP £ (higher)= receive difference
Because the account is in $ and you have borrowed < i% you then lend (buy) GBP
and will receive the difference

Note :
Accounts are calculated at Libor or Roll Rates which change daily and are different
from normal bank interest rates.
 2.Market News and Developments
12 Nov (View of The Day)
Geoffrey Yu, Foreign Exchange Strategist at UBS
-With the Fed’s second round of QE now priced in the currency markets, it is
possible that investors may begin to look at the dollar as a growth play.

-Recent improvements in US economic data may result in the dollar becoming

a proxy for going long US growth on an absolute basis.

-Mr. Yu acknowledges that the key trend seen this year: US investors pulling
out of domestic markets and sending funds overseas in response to QE
expectations has not shown definite signs of turning.
 2.Market News and Developments
-He believes that stronger domestic data will affect FED policy, and if FED can
be convinced that the US economy is returning to health through less
stimulus policy, investors will worry less about dollar debasement and be
more willing to keep money onshore

-Things might continue to go sour in the eurozone

-We will closely monitoring currency flows and any potential signal of a shift
in fundamental sentiment on the US economy
2.Market News and Developments
16 Nov
-Vice-Chair and President New York Fed
Dismissed concerns that quantitative easing was aimed at weakening the dollar or
that it could ignite inflation

19 Nov
Mr Bernanke said: “The US runs the risk of seeing millions of workers unemployed
or underemployed for many years. As a society, we should find that outcome
unacceptable.”

The Fed’s case was boosted by weak US inflation data. Core consumer price
inflation, excluding volatile food and energy prices, rose by only 0.6 per cent on the
previous year in October – the lowest since records began in 1957
 2.Market News and Developments
-Mr Trichet said failure to solve global imbalances would “pave the way for
future major difficulties”. Dominique Strauss-Kahn, managing director of the
International Monetary Fund, said it was understood that “the bigger you
become, the more responsibility you get and you cannot go on being a free
rider” – in what seemed a clear reference to China.

-But Mr Trichet also said: “We strongly share the view that a solid, strong
dollar vis-à-vis the other major floating currency ... is very important.”

-“Currency undervaluation by surplus countries is inhibiting needed

international adjustment and creating spillover effects that would not exist if
exchange rates better reflected market fundamentals,” said Mr Bernanke

-The conference marked a return to civility after attacks on Fed policy by

politicians from Germany to Brazil, who dislike the dollar weakening caused
by the Fed’s efforts to stimulate the US economy.
2.Market News and Developments
21 Nov

The US Federal Reserve will slash its growth forecasts

and predict higher unemployment when it releases
updated economic projections this week.

These expectations will be giving at the FOMC meeting

minutes
2.Market News and Developments
In the weeks to come :

30 Nov :
- Japan Unemployment rate
- Euro Unemployment rate
- Fed Beige Book

3 Dec:
-US unemployment rate
Forex Dealing Form
1. Current Positions: Adjustments and
outcomes
1. Current Positions: Adjustments and
outcomes
1. Current Positions: Adjustments and
outcomes