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Unit 17

foreign exchange market валютний ринок

legal tender законний платіжний засіб

monies грошові суми

rate of exchange курс обміну

unit of currency грошова одиниця

currency mix структура грошової маси

spot market ринок готівки

forward market форвардний ринок

futures market ф’ючерський ринок

currency options market ринок валютних опціонів1

bid – ask spread різниця між цінами продавця та покупця

currency arbitrage валютний арбітраж

clearing порівняння деталей фінансової угоди перед розрахунком

Option (опціон1) право вибору; право купівлі та продажу цінних паперів за обумовлену ціну в обумовлений термін

1. Read sentences only with new lexis and translate them.

  1. The rate exchange is the value of one unit of the foreign currency expressed in the other currency concerned.

  2. The Market performs two major functions.

  3. Somewhat more than half of all transactions are spot deals.

  4. The cost of transacting in the wholesale market is reflected in the bid-ask (or bid-offer) spread.

  5. The exchange market is global in character.

  6. The operation is called currency arbitrage.

  7. Trading in the Market occurs 24 hours a day in various centers around the world.

  8. Currencies can be bought or sold in the Foreign Exchange Market.

2. Put the missing letters.

cl..ring, sp..t m..rket, c..rrency arb..tr..ge, futu…s m..rket, l..g..l t..nd..r, m..n..s, r,,te of exc….nge, f..ward ma…k..t, c…r….ncy m..x.

3. Work in pairs. One student has to name all the words sh/he memorised from the word list another student has to translate them.

Read the text.

FOREIGN EXCHANGE MARKET. GLOBAL FINANCIAL MARKETS

TRADING IN THE FOREIGN EXCHANGE MARKET

Any one country's currency is a legal tender only within its national boundaries. To trade beyond these boundaries involves exchange of monies. Exchange of currencies is possible if national currencies are interchangeable. The terms on which one currency will exchange against another are referred to as rate of exchange. The rate exchange is the value of one unit of the foreign currency expressed in the other currency concerned.

Currencies can be bought or sold in the Foreign Exchange Market. The Foreign Exchange Market is the oldest financial market in existence. It is also the largest international financial market in the world.

The Market performs two major functions: it facilitates the foreign exchange needs of exporters and importers, and it enables individuals, corporations and governments to obtain a desired currency mix of their portfolios.

Trading in the Market occurs 24 hours a day in various centers around the world. Deals are concluded bilaterally over telecommunications networks by different counterparties, some of whom serve as market makers or dealers.

The exchange market is global in character, it does not have one centralized location; trading is heavily concentrated in a handful of centers: London, New York, Tokyo, etc. The great majority of foreign exchange trading takes place in the interbank market1 between traders or market makers who represent large commercial banks or other financial institutions.

Foreign exchange departments of large commercial banks are linked across the world through a sophisticated network of communication systems. The market consists of three major sectors: the spot market, the forward and futures markets and the currency options market.

Somewhat more than half of all transactions are spot deals. In other words, they are transactions which call for2 the delivery of the two currencies exchanged within two business days. The remainder3 of the deals can be classified as outright4 forwards, swaps5, futures and options.

Such transactions are performed by customers who do not know when they will need foreign currency to overcome the growing exposure to currency risks in the conditions of foreign exchange rate volatility6.

The cost of transacting in the wholesale market is reflected in the bid-ask (or bid-offer) spread. Prices in the market depend on the volume of transactions, exchange rate volatility, the availability of relevant information and the strength of competition in the Market.

As prices are different in different markets, professional dealers take advantage of it buying, say, US dollars for Yen in Singapore and selling them in London for sterling and then back into Yen in New York - all for a profit. The operation is called currency arbitrage.

The delivery of the individual currencies involved in a foreign exchange transaction typically takes place through the payment systems of the two countries whose currencies are traded.

The reliance on the domestic currency payment system of individual countries for the clearing and settlement of foreign exchange transactions means that the stability and integrity of the global foreign exchange market depends on both the soundness of the individual counterparties and the robustness7 of national payment systems.

Words:

the interbank market1 міжбанківський ринок

call for2 вимагати, передбачати

remainder3 частина, яка залишилася

outright4 звичайний

swap5 своп (обмін одних цінних паперів на інші)

volatility6 мінливість

the robustness7 міцність