Exam 5: The Foreign Exchange Market

Use the table to answer following question(s). -Refer to Table 5.1. The current spot rate of dollars per pound as quoted in a newspaper is ________ or ________.

A confusing "quirk" of international exchange rates occurs when calculating the percentage change in spot rates from one period to another. The percent change in the spot rate from one period to another when quoted using foreign currency terms is always greater than the percent changes quoted when using home currency terms.

The ________ is the mechanism by which participants transfer purchasing power between countries, obtain or provide credit for international trade transactions, and minimize exposure to the risks of exchange rate changes.

The United Kingdom and United States together make up nearly ________ of daily currency trading.

The European and American terms for foreign currency exchange are square roots of one another.

Foreign exchange markets are a relatively recent phenomenon, beginning with the agreement at Bretton Woods.

A common type of swap transaction in the foreign exchange market is the ________ where the dealer buys the currency in the spot market and sells the same amount back to the same bank in the forward market.

The most commonly quoted currency exchange is that between the U.S. dollar and the European euro. For example, a quotation of EUR/USD 1.2174. The euro is the base currency and the dollar the price currency.

A spot transaction in the interbank market for foreign exchange would typically involve a two-day delay in the actual delivery of the currencies, while such a transaction between a bank and its commercial customer would not necessarily involve a two-day wait.

Business firms in countries with exchange controls, for example, China (mainland), often must surrender foreign exchange earned from exports to the central bank at the daily fixing price.

A forward contract to deliver British pounds for U.S. dollars could be described either as ________ or ________.

________ is NOT one of the three categories reported for foreign exchange.

Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.

It is characteristic of foreign exchange dealers to:

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

Nondeliverable Forwards were originally envisioned as a method of currency speculation, but it is now estimated that 70% of NDFs are trading for hedging purposes.

The following is an example of an American term foreign exchange quote:

The ________ is a derivative forward contract that was created in the 1990s. It has the same characteristics and documentation requirements as traditional forward contracts except that they are only settled in U.S. dollars and the foreign currency involved in the transaction is not delivered.

Daily trading volume in the foreign exchange market was about ________ per ________ in 2015.

Which of the following may be participants in the foreign exchange markets?