The foreign exchange transactions can be carried out in four different ways. The first is called spot market,
the second forward Outright and swaps, thirdly through options and finally betting on the spread.
Making foreign exchange transactions has certain advantages that other types of investment hasn’t. The
foreign exchange market operates 24 hours a day due to the overlap between the major markets of
Europe, Asia and the United States.
Over the last thirty years, and particularly after the oil crisis in 1973, foreign exchange transactions have
become very popular. The liquidity occurred in the financial markets because of the excessive petrodollars meant that many people saw in the speculation a way to increase their profits. Of course not all of them went well, however as years went by foreign exchange transactions have generated new jobs and have become, for many people, a way of living.
With the advent of technological innovations the time to carry out operations in foreign currency could be extend, currently the time range to conduct transactions in foreign currencies goes from Sunday at 23:00 pm up to Friday at 23:00 hours .
Another advantage of operating in foreign currency, is that these offer a spread (the difference between
the purchase price and selling price), much lower than the stock market. Historically high monetary spreads
were only for those persons or institutions that conduct operations of 1 million dollars or more, but now it
has been extended to investors who trade smaller quantity of money.
Over the last few months the media predicted the collapse of the dollar as something irremediable and there was no turning back, but as we know financial markets times tend to be shorter than in most other activities carried out by the man, and above all more volatile .
Evolving of currencies is a constant in forex market, the quotation of currencies vary from one moment to another and cycles in the price increase are very short, for this reason we must be alert to what is happening in the market for being able to take full advantage.
One of the main news that was met in recent weeks was the evolution of the dollar currency, the north american currency scaled 0.3% per euro. The evolution of the north american currency closed rising against 12 of its 16 most operated counterparts.
Evolving of the currency occurred after having known the details of the trade deficit of the United States which was the lowest in two years. It will be recalled that one of the factors who had influenced the dollar fall was high trade deficit proceeds of business dealings that the country maintains with northern china.
As can be seen market encourage can change from one moment to another, and the evolution of currency, in this case the dollar may shoot up, when a few months ago the economic gurus predicted that this situation was not going to happened.
Commerce is the primary responsible on the inflow of foreign exchange, as his main objective is to generate foreign exchange earnings. The export promotion is the main weapon that nations have to generate foreign exchange entries, this way the country gets fresh funds in exchange for manufactured goods or raw materials that they generate.
The Latin American countries are nations that have comparative advantages and they use them to export their raw materials abroad. Based on this mechanism and exploiting the advantages that nature has provide them, provoke the inflow of foreign currencies, more precisely dollars.
In Argentina the exchange rate that was established after the departure of convertibility caused that exports increased and so the foreign exchange entry. The Banco Central, responsible for maintaining the exchange rate, intervene daily the foreign exchange market and purchase the excess of dollars for the price not to come down.
In Switzerland the inflow of currencies was regulated through two measures that were prevailing since 1978. The first prohibited to foreigners, the acquisition of Swiss titles and the second one, limited imports of notes from foreign banks to a value of 20,000 Swiss francs per quarter per person. The reality proved, with the relentless rise of the Swiss franc over the year 1978, that these measures were practically null, and only other resolutions, combined with the program announced on November 1 by President Carter, have allowed some stability of the Swiss franc over the dollar.
The man as part of nature and society have needs that are essential to be covered. The fall of the feudal and mercantilism systems allowed that from their mistakes, what is now known as capitalism was born. This is the system that governs us today and with it, a system of exchange of goods was established since currency have been established as a tool for access to consumer goods.
The refinement of the capitalist system produced that currency not only works as the mean to access to goods for the satisfaction of needs, but now it’s used to invest in foreign currencies. Investing in currencies is a very profitable activity, but develop it implicates running some risks.
The money market is very volatile, and invest in currencies is considered a high-risk sport is not suitable for people with a tendency to have heart problems, because fluctuations in the exchange markets can be fatal.
As everyone knows the world will dance the rhythm imposed by the United States, and a week ago the northern country lowered the money costs and anchored the rate of interest at 4.25%. Thus investing in dollar currencies will not leave as much profit as in previous years. This decision responds to a deceleration of economic activity in the United States marked by indicators of it. Meanwhile, across the Atlantic, the economy enjoys a very good health leaving a very conducive scenario to investing in currencies, the euro at the moment pays 4% interest to those who choose to make an investment in that currency, but the peculiarity is that by now there wasn’t even one day in which it has slowed his increase in value.
Which are the possibilities of investment that the stock market gives us counter parties with forex?. In the financial world there is a word that is repeated constantly “Financial Assets,” What are we meaning by this expression?. A financial asset is the name given to the holder of such right, while his counterpart is a financial liability, held by the debtor. Which are the financial assets par excellence?. Undoubtedly bonds and shares are the most traded and popular. Which are the risks of this type of investment?. The bonds, for example, are a very useful financial asset and the market value of a bond depends on two variables: First of the expectations of payment of the bond, in case of an increase of risk, the price of the bond falls. The risk is different according to whoever issued the bond. As for the government, the risk of payment increases as much as the government maintains budgetary problems. So in view of the announcement of an increase in the financial deficit bonds tend to depress prices. The actions are another of the assets that are not traded in Fx (forex), but they do in the stock market. The return on the shares is simply the winnings of the company. If the firm have looses, the shares have a zero return. In Fx (forex) these situations do not occur. Here earn money is a constant as the possibilities of increasing your profits through various pairs leaves no room to loose. Obviously there are always risks and it must be said but Fx (forex) market is more stable than the stock market because it doesn’t depend on political decisions. For example, if we have shares of Repsol, a barrel of oil increases daily and the government decides to implement tax deductions for exports to control prices in the domestic market, this will make our actions fall performance despite the increase is in the oil. Fx (forex) although is on standby to the political and economic measures have a much more marked independence and therefore does not suffer the consequences.
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