EXCHANGE RATE QUOTATIONS BY BANKS TO

IMPORTERS/EXPORTERS

Jessica vaz(131)
Mohit Vazir(132)
Priya Vora(133)
Jai Vussonji(134)

FOREIGN EXCHANGE
Foreign exchange is the exchange of one
currency in terms of another.The term foreign
exchange is abbreviated as forex/FX
Increasing globalisation has led to a massive
increase in the number of foreign exchange
transactions in recent decades.
The global financial market is by far the
largest financial market ,with average daily
volumes in trillions of dollars.

FOREIGN EXCHANGE TRANSACTIONS

Foreign exchange transaction is a binding
agreement,in which one currency is sold or bought
against another currency at an agreed exchange
rate on the current date or a specified future date.
Foreign exchange transactions include spot and
forward purchase and sale transaction
Transaction is talked from the foreign currency or
base currency point of view.
USD currency is the base currency in case of
INR,SGD,JPY.

FOREIGN EXCHANGE RATE

Foreign-exchange rate : The rate at which one currency will
be exchanged for another.
Each currency is denoted by a 3 character ISO code (For
eg:USD,INR,GBP) whereas currency pairings are expressed
as 2 ISO codes seperated by a division symbol(For
eg:USD/INR),the first representing base currency and the
second representing the quoted/secondary currency.
USD/INR=66.50 denotes that one unit of dollar(base
currency )can be exchanged for 66.14
Rupees(quoted/secondary currency)

COMMON CURRENCY SYMBOLS

USD:US Dollar
INR:Indian Rupee
HKD:Hong Kong Dollar
EUR:Euro
JPY:Japanse Yen
GBP:British Pound
CHF:Swiss Frank
SGD:Singapore Dollar
CAD:Canadian Dollar
AUD:Australlian Dollar
RMB:Chinese Renminbi

Most traded currency pairs,

accounting for 90% of daily
trading activity are :
1.
2.
3.
4.
5.
6.

EUR/USD
JPY/USD
USD/ CHF
AUD/USD
GBP/USD
USD/CAD

DIRECT
DIRECT
QUOTATION
QUOTATION

WAYS OF
QUOTING
EXCHANGE
RATE
INDIRECT
INDIRECT
QUOTATION
QUOTATION

EXCHANGE RATE QUOTATIONS

Direct Quotation:Price of foreign currency is

quoted in terms of the home currency or
local currency.(For example:USD/INR=66.50
).India follows the concept rate of Direct
quotation since the year 1993.

Indirect Quotation:Exchange rates are

quoted in terms of variable units of foreign
currency as equivalent to a fixed number of
units of home currency.(For
example:INR/USD=0.0150$/Rs.).

BUYING/SELLING TRANSACTIONS

Bid rate:Rate at which the market is

prepared to purchase a currency
Ask rate/offer rate:Rate at which the
market is prepared to sell a currency
Two way quotation:US $1=INR
66.50/66.60 where the lower one is the
buying rate and the higher one is the
selling rate.

Cross rate:When rates for a particular pair of currency are

not available in one market,the rate is obtained by crossing
rate of one of the currencies from another market.
USD is the most widely used currency and is often used as
a vehicle currency
This helps in reduction of no. of quotes in the market as
exchange rate between two currencies can be determined
through their quotes against the USD
Availability of USD quote for all currencies can help in
determining the exchange rate for any pair of currencies by
using the cross rate.
For example:
cross quote for EUR-GBP=EUR/USD* USD/GBP

i)Example:1 USD=Rs.66.50/60
1 EURO=USD1.12/13
The importer can buy euro against INR at
66.60*1.12.

ii)Example:1 USD=Rs.66.50/60
1 USD= 0.88/89 EURO
The importer can buy euro against INR at
66.60/0.88=75.68

Example:An importer wants to buy 10,000

Euros .The rates are as follows
U.S$=Euro 0.88/89
U.S$=Rs.66.50/60
The importer will buy INR at the rate of
66.60/0.88=Rs.75.68
Total amount to be paid by the importer will be
10000*75.68=Rs.756800.

Example:
USD 1 = INR 61.2550/61.2650
Singapore Market
USD 1 = SGD 1.2580 / 1.2650
Exporter approaches you as banker with SGD 100000
for conversion into INR. What rate would you quote?
1 SGD=61.2650/1.2580=48.70 INR
Total amount =48.70*100000=4870000