Overview

This eCourse consists of two modules. Every second of the day the value of currencies will change, driven by global trade, investment, and speculation. This is a world where bulls and bears fight for control, where a "yard" is a billion and "cable" is an exchange rate between two of the most active currencies.

Module 1 looks at the buying and selling of currencies, the means by which currencies are traded, and how trades are actually transacted in the market. The module also describes the positions that traders may take in currencies, the constraints that may be applied to those positions, and how the profit/loss on those positions is calculated.

Many foreign exchange transactions settle on the spot date, but what happens if a market participant wants to exchange currency, say, in two months' time rather than in two days? The forward foreign exchange market, which accounts for almost two-thirds of the daily turnover in the entire FX market, provides a solution.

A forward FX contract is simple a transaction agreed today that allows for the exchange of two currencies at a pre-specified settlement date in the future at a present exchange rate. Module 2 describes these contracts, their relationship with the money markets, and the different forms they take. The module also explores different settlement dates and how the market handles public holidays.

Objective

On completion of this course, you will be able to:
- Interpret the typical dealing room terminology relevant to the spot FX market
- Recognize how a spot deal is conducted
- Calculate a cross rate
- Recognize how to run a position and square a position with a profit
- List and define the different periods used in the forwards market
- Explain the terms "premium" and "discount" and their relationship to interest rates
- Describe the basic characteristics of the forward FX market

Content

Module 1: FX Spot Market - Trading
Topic 1: Mechanics of Spot Trading
Topic 2: Managing Spot Positions

Module 2: FX Forward Market - An Introduction
Topic 1: Forward Foreign Exchange
Topic 2: Forward Value Dates