Overview

This tutorial explores the FX market and its role in the global economy. We examine the difference between hard and exotic currencies, the reason for the importance of the US dollar, the euro, the different exchange rate systems, and the major currency pairs that are traded globally on a daily basis. We describe the consequences of the recent market events such as the investigations into the WM/Reuters fix. We outline the structure which a bank organises its FX business and the different roles within that structure. We look at some of the key risks generated by FX businesses and the solutions employed by banks to mitigate these risks. This tutorial introduces the spot FX market and explains how currencies can be traded similarly to commodities.

Objective

On completion of this tutorial, you will be able to:
- Define the foreign exchange (FX) market and list the means by which currency prices are quoted in the market 
- Identify the different exchange rate systems and currency unions 
- identify the significance of the FX market in terms of size and the describe the key market players
- Explain the typical structure which a bank organises its FX business 
- Identify the basic characteristics of the spot foreign exchange market 
- Recall how spot FX deals are quoted in the market

Content

Module 1: Foreign Exchange (FX) Market - An Introduction 
Topic 1: Overview of the Foreign Exchange Market
Topic 2: World Currencies

Module 2: The Foreign Exchange Business 
Topic 1: Market Data & Analysis
Topic 2: Structure of a Bank FX Business
Topic 3: Continuous Linked Settlement (CLS) 

Module 3: FX Spot Market - An Introduction 
Topic 1: Spot Market Quotations
Topic 2: Cross Rates
Topic 3: Value/Settlement Dates