Foreign Exchange Transactions Research Articles

Foreign Exchange Dealer Asset Pricing

We show that excess returns to the carry trade can be interpreted as compensation for foreign exchange dealers' capital risk. Given that the top market makers in foreign exchange are at the heart of the market's information aggregation process we also suggest that it is their marginal value of wealth which prices foreign currencies. Consistent with this hypothesis the empirical results show that shocks to the equity capital ratios of the top three foreign exchange dealers have explanatory power for the cross-sectional variation in expected currency market returns, while those of the average dealer provide no substantial additional information.

貿易・為替自由化をめぐる国際政治経済―1949～1964年

貿易・為替自由化をめぐる国際政治経済―1949～1964年

Empiryczna analiza zachowań młodego pokolenia klientów na rynku usług wymiany walut

Purpose – Defining preferences of the young generation of Poles’ representatives with regard to using services of the currency exchange market. Research method – A survey conducted on a group of 671 respondents aged 18 – 25 studying at the Podkarpackie Province’s universities and carried out in the form of a questionnaire in November 2017. It was preceded by a pilot dated to October 2017. Results – The behaviour of the young generation of Poles on the financial services market, the reasons for foreign exchange transactions by this group of clients, the determinants of the selection of a currency exchange site and the nature and frequency of using such services were determined. In addition, types of currencies and average amounts that were the subject of transactions on the currency exchange market for the analysed research sample were identified. Originality /value – The research outcome serves broadening knowledge about the behaviour of homogeneous groups of clients on the Polish currency exchange market.

Особенности организации бухгалтерского учета внешнеэкономической деятельности в Азербайджане

The article deals with the feature of organization and accounting of foreign economic activity (FEA). Accounting for foreign economic activity is regulated by normative acts, international financial reporting standards and national accounting standards, and meets the requirements of the legislation, the interests of domestic and foreign policy of the Republic. Accounting policy FEA for tax accounting purposes, should be formed on the basis of requirements Tax Code of the Azerbaijan Republic. The main feature of the accounting policy of foreign trade is a reflection of foreign exchange transactions, import and export transactions, as well as other assets and liabilities denominated in foreign currencies. Organization of accounting of FEA are carried out with application of Accounting Plan. On the basis of the accounting organization develops and approves work plan of accounts, containing a complete list of synthetic and analytical accounts necessary to take account of currency and export-import operations and transactions.

Analisa Transaksi Spot, Forward dan Swap Sebagai Alat Pengendalian Risiko

Risk control is an important step and determines overall risk management. The known risks and their potential consequences must be managed appropriately, effectively, and accordingly company. Risk control is also necessary when foreign exchange transactions are due to currency fluctuations and foreign exchange differences. The exchange rate difference can be obtained from spot, forward and swap transactions we get from spot, forward and swap transactions. The purpose of this research is as follows: 1. To know the procedure of Spot, Forward and Swap foreign exchange transaction at X bank,2. To know the risk control in foreign currency transactions at X bank, 3. To know the analysis of spot, forward and swap transactions as risk control tools at X bank. The research method used in this research is Research Methods Quantitative Descriptive Analysis. With this method facilitate the author in analyzing data from the results described by the author.The results show: spot transactions, certainly will avoid the risk of exchange rate fluctuations because the bank will directly benefit from the spot transactions. And using forward and swap transactions must still be done because to avoid the risk of unexpected exchange rate fluctuations, although there are some larger transactions than forward and swap contracts but negotiations can be done together.
 
 Keywords: spot, forward, swap, risk control

Minimizing The Risk of Foreign Exchange Transactions in Facing Foreign Exchange Exposure

The purpose This study discusses how to minimize foreign exchange transaction risk by using hedging technique method. Where this research performs actions taken to protect a company against exchange rate exposure and to measure the extent to which a company can be influenced by the exchange rate. Method, This research is quantitative descriptive by analyzing forward contract method in facing foreign exchange exposure. Calculates the forward rate used to hedge the net assets and liabilities of the company in foreign currency. Result,By using the contractual forward contract hedging method, the forward contract hedging method is more profitable than using open position method to face foreign exchange exposure. From the data obtained forward contract hedging method provides exchange rate advantage of Rp 36.877.227.752.936 while the open position method provides for foreign exchange loss of Rp 36.877.227.752.936 The findingsFrom this study companies that conduct international transactions or exposure and imports are influenced by fluctuations in foreign exchange rates. The MNC company will be able to reduce the risk of currency fluctuation losses, so as not to have a worse impact on the company Keywords: foreign exchange, hedging, risk ,currency

PENGARUH PERGERAKAN NILAI TUKAR DAN VOLUME TRANSAKSI TERHADAP PENDAPATAN TRANSAKSI DEVISA (STUDI KASUS PADA PT. BII, TBK KANTOR CABANG BOGOR)

Exchange or conversion rate is one of the important factors in an open economy since its big impact on the running transaction balance, foreign balance or other economical factors. Exchange rate plays a central role in international trade because exchange rate enables us to compare all products and services prices from other countries. The policy to predict and react on the exchange rate fluctuation is developing in line with the growing understanding of how the national and international monetary systems work. In addition transparency in accounting and taxation rules concerning the un/profitability from the exchange transactions and more familiar of economical effect of foreign currencies on cash flow and market value in the future. This research was carried out at PT. BII Ltd. Bogor Branch Office, and based on the problems, the purposes of the study were: (1) to know what factor that influence the movement of exchange rate (2) to see whether the movement and the volume of the exchange rate have significant relationship on the income from foreign exchange transactions (3) to identify if there is an influence of foreign exchange movement on the income from foreign exchange transactions and (4) to know is there an influence of transaction volume on the income from foreign exchange transactions. There were several factors that influence the foreign exchange rate on US Dollar, they are: (1) economical foundation (including inflation rate, BI interest rate, government control and income rate) (2) external factors (including American interest rate and policy, the rise of world crude oil price, European interest rate, American economic condition etc.) (3) market bias (including supply and demand, expectation and rumors). The influence of both foreign exchange rate (FER) and transaction volume (TV) analysis on the income of foreign exchange transactions (IFET) at PT. BII Ltd. Bogor Branch Office the writer found the regression equation as = -432050000.042 + 4762.800NT + 0.000595VT. The doubled regression linear of collected data gave a parameter value 4762.800NT and 0.000595VT and a constant value -432050000.042. The double correlation of the FER variable and the TV on the IFET at this company was positive and the coefficient correlation (r) was 0.577. The determinant coefficient (r squared) was 0.333 that means 33.30% of the IFET variety was caused by doubled regression between the IFET with FER and TV. The remaining 66.70% was explained by variables other than FER and TV that influence the IFET.

The internationalization of local currencies of emerging countries: the experience of the Mexican peso and the Chinese renminbi

<p>Globalization introduced private and structural endogenous money (private monetary debts) as the main instrument of financial capital mobilization in the international financial system. A main consequence of this feature was the internalization of emerging economies currencies unfolding two successful experiences: the foreign exchange transactions related to the Mexican peso and the Chinese renminbi. The former currency internationalized as a result of the institutional changes unfolded in the Mexican economy and it’s insertion to the North American region (NAFTA); while the latter stemmed from a government strategy to influence the worldwide economy as a result of its accelerated economic growth and increased importance in the world economy. In this paper are discussed three main themes: the way in which emerging economies currencies internationalized; the insertion of these economies in the international market, and the divergent developments of successful currency internationalization.</p>

Liquidity Provision in the Foreign Exchange Market

Foreign exchange operates as a two-tiered over-the-counter (OTC) market dominated by large, strategic dealers. Using proprietary high frequency data on quotes by the largest foreign exchange dealer banks in the dealer-to-customer (D2C) market, we find a significant heterogeneity in their behavior. We develop a model of strategic competition that accounts for this heterogeneity and the two-tier market structure and allows us to link prices and bid-ask spreads in the D2C and dealer-to-dealer (D2D) market segments. We use the model to recover dealers' risk aversions and inventories from their quotes in the D2C segment and construct an endogenous measure of systemic, non-diversi able risk capturing the cross-sectional liquidity-risk mismatch. Consistent with the model predictions, we find that liquidity mismatch positively predicts prices in the D2D market whereas the cross-sectional dispersion in dealer D2C spreads negatively predicts the level of spreads in the D2D market.

FX Markets Move on Surprise News Institutional Investor Trading Behavior Around Brexit, the US Election, and the Swiss Franc Floor

In this JPMorgan Chase Institute report, we examined three recent events that had significant impacts on foreign exchange (FX) markets: the decision by the Swiss National Bank to end their minimum exchange rate policy on January 15, 2015, the Brexit referendum on June 23, 2016, and the US Presidential Election on November 8, 2016. All three events shared one important quality — they had unexpected outcomes that led to the largest one-day moves in the relevant exchange rates in the last 20 years — that made them ideal candidates for research aimed at building a better understanding of institutional investor trading behavior. With this research objective in mind, we examined institutional investor trades in FX markets in the days and hours leading up to, during, and after each event. First, we find that FX trading volumes for hedge funds, asset managers, and banks spiked during the three events. In contrast, volumes for the corporate, pension/insurance, and public/other investor sectors barely increased. Second, institutional investors traded significant amounts of FX risk during the events, but their net flows alone cannot explain the sharp exchange rate movements during the repricing periods. Third, only hedge funds consistently transferred risk immediately after news broke and as currencies repriced sharply. Other investors transferred risk but only after exchange rates stabilized. Fourth, the active investor sectors played different roles in each event: During the SNB event, they all bought CHF, trading in the direction of the prevailing move in exchange rates; during the Brexit event their net flows were mixed; and during the US Election event they bought MXN, trading against the prevailing move in exchange rates. Fifth, within each investor sector, there was considerable variation in trading behavior during each event. Finally, banks and hedge funds traded higher volumes outside of their normal business hours and outside of a currency’s local market; other investor sectors did not. Our results are informative for policy discussions along two dimensions: financial market stability and central bank communications. The report leverages a new data asset that includes nearly 400 million institutional investor transactions across all asset classes, sourced from the Markets division of J.P. Morgan’s Corporate & Investment Bank. The analysis in this report is based on 120,000 spot and forward FX transactions in Swiss Francs (CHF), the Pound sterling (GBP), or the Mexican Peso (MXN) that were executed in the hours before, during, and after news broke for each event.

Volatility spillovers between foreign exchange and stock markets in industrialized countries

This paper empirically analyses the evidence of intra-spillovers and inter-spillovers between foreign exchange and stock markets in the seven economies which constitute the majority of foreign exchange transactions (i.e. the United Kingdom, the United States, the Euro area, Australia, Switzerland, Canada, and Japan). Daily data during the period 1 January 1990 to 31 December 2015 and during the pre-global and post-global financial crisis periods is used. To that end, we employ two econometric methodologies: the C-GARCH methodology and the SVAR framework. Results suggest that: (i) permanent and transitory components of the conditional variance exhibit peaks in volatility during episodes of growing economic and financial instability; (ii) the long-run volatility relationships are stronger than the short-run volatility linkages with a reinforcement during the post-global financial crisis period; (iii) the presence of intra-spillovers and inter-spillovers increases substantially during the post-global financial crisis period and (iv) the stock markets play a dominant role in the transmission of long-run and short-run volatility in all samples, except for the period after the global financial crisis, where the foreign exchange markets are the main long-run volatility triggers.

Monetary Surrogates:the Looking Glass of Modern Regulation

«Current legislation of the Russian Federation establishes a variety of currency restrictions, which are a set of rules established by the state, designed to protect the national currency to affect the behavior of participants in foreign exchange transactions by imposing prohibitions or additional encumbrances on certain foreign exchange transactions». One of the such rules is the provision of art. 27 Federal Law No. 86-FZ of 10.07.2002 «On the Central Bank of the Russian Federation (the Bank of Russia)», according to which the introduction in the territory of the Russian Federation of other monetary units and the issuance of monetary surrogates are prohibited. Meanwhile, the current legislation does not establish any liability for the issuance of cash surrogates. Moreover, new technologies are increasingly being introduced into our lives and are constantly inf luencing the legal environment in which we are currently surrounded. Much attention today is focused on the topic of cryptocurrency and the use of blockchain technology in the public and private sectors. Currently, both professional and non- professional participants are increasingly discussing various aspects of the use of cryptocurrencies in a particular state. The article analyzes urgent issues of the circulation of money substitutes, identifies the prospects of establishing criminal responsibility for the issue and circulation of money substitutes, etc.

Capital Controls and Misallocation in the Market for Risk: Bank Lending Channel

Foreign currency debt has led to many crises in emerging markets. However, in the past decade, firms in emerging economies have drastically increased their foreign currency borrowing, making them significantly exposed to depreciation shocks. To reduce their exposure to external shocks, central banks have increased their use of capital controls. In this paper I study whether capital controls can have the unintended consequence of inducing firms to borrow more in foreign currency. I exploit heterogeneity in the strictness of capital controls across Peruvian banks to provide novel causal evidence of the effect of capital controls on local firms' dollar borrowing from banks. Using a unique dataset that includes all foreign exchange transactions and loans given by Peruvian banks, I find that capital controls encourage firms to take more foreign currency loans. I describe a new mechanism to explain these findings, in which capital controls induce local banks to shift exchange rate exposure away from foreigners and onto domestic firms. This is worrisome as the literature shows that depreciation shocks have led to significant reductions in investment and employment for these firms.

Banking Sector Operations and Foreign Direct Investment in Nigeria: A Causality Analysis

This study examined the causality relationship between banking sector operations in Nigeria and foreign direct investment from 1997 to 2015. The causal relationship between Foreign Direct Investment (FDI) and banking sector development in Nigeria is not clear yet, while there abounds empirical and theoretical studies on the nexus between foreign direct investment and economy in general, considerable attempts has not been made on the causality relationship between and banking operations in Nigeria. Specifically, this study ascertained the causal relationship between banking sector deposits, loans and advances, foreign exchange transactions, domiciliary operations, international banking operations and foreign direct investment. To achieve these objectives, this study employed Ordinary Least Square (OLS) econometric technique, Auto Regressive Distributive Lag (ARDL) bound test and granger causality test among others. Secondary data were collected from Central Bank of Nigeria statistical bulletin of 2015. The result indicated significant causal bidirectional relationship between banking sector deposits, foreign exchange transactions and foreign direct investments; a significant unidirectional causal relationship between domiciliary operations and foreign direct investment, while no significant causal relationship existed between loans and advances, international banking operations and foreign direct investment. The study recommends that banking sector should adopt completely smart banking as this evidences low risk, reliability and stability of the banking sector which is essential for inflow of foreign direct investments. Central Bank of Nigeria should cautiously focus on tackling monetary policy variables such monetary policy rate, cash reserve ratio and loan portfolio which a capable of attracting investors from abroad.

Forward, Forward Option and No Hedging Which One is the Best for Managing Currency Risk?

Bank Indonesia Regulation No.18/18/PBI/2016 concerning foreign exchange transactions against rupiah between banks and domestic parties, indicates that the importance of hedging for business actors in Indonesia. Based on the data of the rupiah exchange rate movements against the dollar from January 2006 to December 2016 shows that the fluctuation of the rupiah against the US dollar tends to weaken, although at some point the observation shows the strengthening of the rupiah against the US dollar. The purpose of this research is to assess the impact of forward, Forward Option and No Hedging Strategy for managing currency exposure between IDR to USD. Using data from January 2006–December 2016 taken from the website of Bank Indonesia and Federal Reserve. Total 396 simulations, consists of 132 using Forward simulations, 132 using Forward Option simulations and 132using No Hedging simulations. Findings from this research show that Forward Option was has no positive contribution in managing currency exposure, No Hedging Strategy has 36,36 percent positive contribution and the forward contract has 72,73 percent positive contribution in managing currency exposure. Its means Forward Contract was better than forward Option and No Hedging Strategies in managing currency exposure. DOI: https://doi.org/10.26905/jkdp.v21i3.1428

Puzzles in the Tokyo fixing in the forex market: Order imbalances and Bank pricing

“Fixing” in the foreign exchange market determines the mid-point exchange rate that is applied to spot foreign exchange transactions between banks and bank customers. The paper analyzed the Tokyo fixing practices, which allow each bank to announce the fixing rate based on the interbank exchange rate transactions at 9:55a.m. Based on volumes of customer orders, submitted for transaction at the fixing price, banks submit orders to the interbank market at the fixing time window. Three puzzles regarding the Tokyo fixing are: (1) the spikes in prices at the fixing time occur despite a high level of liquidity in the market; (2) the order flows before the fixing are biased toward the dollar, which generates a predictable price pattern; and (3) the bank-announced fixing rates are biased toward dollar appreciation. These puzzles can be explained as a consequence of unique institutional features of the Tokyo fixing and of banks' real-side customers in Japan.

The Foreign Exchange System in Korea: A Literature Survey

The foreign exchange system of a country refers to the laws, regulations, and institutions that govern foreign exchange transactions between residents and non-residents and determine movement of exchange rates. The foreign exchange system in Korea has gone through a lot of changes in a relatively short time period. This paper presents a summary of the major changes in the foreign system in Korea together with a review of the academic literature on the foreign exchange system in Korea. In particular, the paper addresses four aspects about the foreign exchange system in Korea: the exchange rate regime, the capital account liberalization, the Asian currency crisis and the policy response, and the global financial crisis and the foreign exchange macro-prudential regulations.

Offshore renminbi trading: Findings from the 2013 Triennial Central Bank Survey

Using foreign exchange transaction data reported in the Triennial Central Bank Survey by the Bank for International Settlements, we find that offshore renminbi (RMB) trading activity is affected by both the host economy's characteristics and links with China. For instance, the occurrence of offshore RMB trading is determined by the economy's GDP, stage of financial development, equity market capitalization and free trade agreement with China. When an economy hosts offshore RMB trading, the trading volume is affected by the size of its foreign exchange market, equity market capitalization, as well as the bilateral link with China through FDI flows.

AMALAN PERTUKARAN ASING KONVENSIONAL: ANALISA BERDASARKAN PERSPEKTIF SYARIAH: Foreign Exchange in Conventional Banking Industry: An Analysis from Shariah Perspective

Foreign exchange is the largest market in the world and operates 24 hours a day. Foreign exchange consists of FX Spot, FX Forward, and FX Swap. Shariah guidelines stipulate that any currency exchange must adhere to the rule of al-a¹£arf whereby the exchange of different currencies must exchanged immediately hand-to-hand. Generally, conventional foreign exchange practice contradicts the requirements of al-a¹£arf because it involves an element of riba. However there are different views from Islamic scholars on the permissibility of these transaction. Therefore, the aim of this study is to analyse these foreign exchange transactions from a Shariah perspective. The result of this study shows that FX Spot complies with Shariah guidelines when subject to the requirements of al-a¹£arf. Meanwhile FX Forward and FX Swap are outside the bounds of these guidelines.

AMALAN PERTUKARAN ASING KONVENSIONAL: ANALISA BERDASARKAN PERSPEKTIF SYARIAH

Foreign exchange is the largest market in the world and operates 24 hours a day. Foreign exchange consists of FX Spot, FX Forward, and FX Swap. Shariah guidelines stipulate that any currency exchange must adhere to the rule of al-á¹£arf whereby the exchange of different currencies must exchanged immediately hand-to-hand. Generally, conventional foreign exchange practice contradicts the requirements of al-á¹£arf because it involves an element of riba. However there are different views from Islamic scholars on the permissibility of these transaction. Therefore, the aim of this study is to analyse these foreign exchange transactions from a Shariah perspective. The result of this study shows that FX Spot complies with Shariah guidelines when subject to the requirements of al-á¹£arf. Meanwhile FX Forward and FX Swap are outside the bounds of these guidelines.