TOPIC 5- FM-Foreign Exchange market

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Hey there, lovely students! I get that this week is full of deadlines for you.

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Today, we will learn about The Foreign Exchange Market.

Can you guess, what is the FX market?

• it is the capital market

• it is the debt market

• Exchange one currency for another

Foreign Exchange rate: is the price or value of one currency expressed in terms of another currency.

For example:

1 AUD = 0.8446 USD or AUD/USD=0.8446

How do you read this rate?

• It would cost US$0.8446, to buy AUD $1

• It would cost AUD $0.8446, to buy USD$1

One week ago, The State Bank of Vietnam quoted 1 USD = 24,000 VND.

Today, The State Bank of Vietnam quoted: 1 USD = 23,500 VND.

The VND is...?

• has appreciated against the USD

• has depreciated against the USD

One week ago, The State Bank of Vietnam quoted 1 USD = 24,000 VND.

Today, The State Bank of Vietnam quoted 1 USD = 23,500 VND.

The USD is...?

• has appreciated against the VND

• has depreciated against the VND

In FX, we have 2 way quoting: Direct quote and Indirect quote.

Direct quote: The value of a unit of foreign currency in terms of domestic currency.

Indirect quote: The value of a unit of domestic currency in terms of foreign currency.

In Vietnam, we normally quote 1 USD/VND= 23,947.

This is______?

• Direct quote

• Indirect quote

• I don't know

We also have "Commodity/Base Currency " and "Terms Currency".

Terms currency: the value of the commodity currency is expressed "in terms of" the terms currency

If the quote is: AUD/USD= 0.8447

• AUD is base/commodity currency

• AUD is term currency

• USD is base/commodity currency

• USD is term currency

Now, we will talk about two-way pricing.

In the previous topic, we said that: two-way pricing includes: Buying price & selling price

• Yes, I remember

• I have no idea

Two-way pricing include:

(1) Bid price: The price to buy the commodity currency

(2) Ask/ Offer price: the price to sell the commodity currency

Bid is always___________ than the ask/offer

• Less

• More

• Equal

• It depends