A
Accrual - The portion of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of the deal.
Adjustment - Official action by change in internal economic policies to correct a payment imbalance or in the official currency rate or action by change in the internal economic policies to correct a payment imbalance or in the official currency rate.
Appreciation - Currency appreciates when in response to market demand it strengthens.
Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better.
B
Balance of Trade - The value of a country’s exports minus its imports.
Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.
Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
Bear Market - A market distinguished by declining prices.
Bid Price - The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.
Bid/Ask Spread - The difference between the bid and offer price.
Big Figure - The first two or three digits of a foreign exchange price or rate. Examples: If the USD/JPY bid/ask is 115.27/32, the big figure is 115. On a EUR/USD price of 1.2855/58 the big figure is 1.28. The big figure is often omitted in dealer quotes. The EUR/USD price of 1.2855/58 would be verbally quoted as “55/58″.
Book - In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.
Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.
British Retail Consortium (BRC) Shop Price Index – Measures the rate of inflation at various surveyed retailers. This index only looks at price changes in goods purchased in retail outlets.
Bull Market - A market distinguished by rising prices.
Bundesbank - Germany’s Central Bank.
C
Cable - Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800’s.
Canadian Ivey Purchasing Managers (CIPM) Index – A monthly gauge of Canadian business sentiment issued by the Richard Ivey Business School.
Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Carry Trade – Refers to the simultaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. Examples are the JPY crosses such as GBP/JPY and NZD/JPY.
Cash Market - The market in the actual financial instrument on which a futures or options contract is based.
Central Bank - A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.
Cleared Funds - Funds that are freely available, sent in to settle a trade.
Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will ’square’ the postion.
Clearing - The process of settling a trade.
Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the ‘Asian Contagion’.
Collateral - Something given to secure a loan or as a guarantee of performance.
Commission - A transaction fee charged by a broker.
Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.
Construction Spending – Measures the amount of spending towards new construction, released monthly by the U.S. Department of Commerce’s Census Bureau.
Contract - The standard unit of trading.
Counter Currency - The second listed Currency in a Currency Pair.
Counterparty - One of the participants in a financial transaction.
Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
Cross Currency Pairs - A pair of currencies that does not include the U.S. dollar. For example: EUR/JPY or GBP/CHF.
Currency symbols
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc
Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
Currency Pair - The two currencies that make up a foreign exchange rate. For Example, EUR/USD
Currency Risk - the probability of an adverse change in exchange rates.
Current Account – The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically is the key component to the current account.
No comments:
Post a Comment