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A
Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.
Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.
Agent Bank - (1) A bank acting for a foreign bank. (2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.
Aggregate Supply - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Aggressor - A dealer dealing on an existing charge in the market.
Appreciation - Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite place in a related market, so as to take advantage of small price differentials among markets.
Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Ask - The price at which the currency or instrument is offered.
Ask Rate - The rate at which a financial instrument if recommended for sale (as in bid/ask spread).
Ask (Offer) Price - The cost at which the market is set to sell a definite Currency in a Foreign Exchange Contract or Cross Currency Contract. At this charge, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For instance, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can pay money for one US dollar for 1.4532 Swiss francs.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.
Asset Allocation - Investment practice that divides funds between different markets to attain diversification for risk management purposes and/or expected returns reliable with an investor's objectives.
At best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better.
B
Back Office - Settlement and related processes.
Balance of Trade - The worth of a country's exports minus its imports in the market.
Bank Rate - The rate at which a central bank is prepared to lend money to its domestic banking system.
Bar Chart - A type of chart which consists of four major points: the high and the low prices, which type the vertical bar, the staring price, which is marked with a little horizontal line to the left of the bar, and the ending price, which is marked with a little horizontal line of the right of the bar.
Base currency - United States Dollars. The currency to which each transaction shall be converted at the close of each position.
Basis - The difference between the cash price and futures price.
Basis point - For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms.
Basis trading - Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket - A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear - An investor who believes that prices are going to fall.
Bear Market - A market famous by declining prices.
Bid - The price at which a buyer has offered to purchase the currency or instrument.
Bid PriceThe bid is the price at which the market is set to buy a particular Currency in a Foreign Exchange Contract or Cross Currency Contract. At this charge, the dealer can sell the base currency. It is made known on the left side of the quotation. For instance, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning is that you can sell one US dollar for 1.4527 Swiss francs.
Bid/Ask Spread - The point difference between the bid and offer (ask) price, and the most extensively used measure of market liquidity.
Big Figure - Dealer expression stating, the first two or three digits of a foreign exchange price or rate. These digits seldom change in standard market fluctuations, and so are omitted in dealer quotes, particularly in times of high market activity. For instance, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally not including the first three digits i.e. "30/35".
Book - The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book. Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.
Bretton Woods - The site of the conference which in 1944 led to the organization of the post war foreign exchange system that continued intact until the early 1970s. The conference resulted in the development of the IMF. The system fixed currencies in a fixed exchange charge system with 1% fluctuations of the currency to gold or dollar.
British Retail Consortium (BRC) Shop Price Index - Measures the rate of rise at different surveyed retailers. This index only looks at value changes in goods purchased in retail outlets.
Broker - Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise.
Bundesbank - Central Bank of Germany.
Buy Limit Order - An order to carry out a transaction at a specific price (the limit) or lower.
Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
C
Cable - A term used in the foreign exchange market for the US Dollar/British Pound rate.
Canadian Ivey Purchasing Managers (CIPM) Index - A monthly gauge of Canadian business sentiment that issued by the Richard Ivey Business School.
Candlestick Chart - Chart that displays the day by day trading price range (open, high, low and close). A form of Japanese charting that has become well-liked in the West. A narrow line (shadow) shows the day's value range. A wider body marks the area involving the open and the close. If the open price is higher than the close price, then the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart of the map is not shaded.
Carry - The interest cost of financing securities or other financial instruments held.
Carry Trade - Refers to the instantaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. For Examples are the JPY crosses like GBP/JPY and NZD/JPY.
Cash Delivery - Same day settlement.
Cash market - The market in the actual financial instrument on which a futures or options contract is based.
Cash - normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.
Cash Settlement - A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.
Central Bank - A nations main regulatory bank. Traditionally, its primary responsibility is development and implementation of monetary policy.
Chartist - An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.
Cleared Funds - Funds that are generously accessible, sent in to settle a trade.
Clearing - The method of settling a trade.
Closed position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Closing Market Rate - The rate at which a place can be closed based on the market price at end of the day.
Collateral - Something specified to secure a loan or as a promise of performance.
Commission - The fee that a broker may charge clients for dealing on their behalf.
Confirmation - It is the written acknowledgment of a trade, listing essential details like the date, the size of the transaction, the price, the commission, and the amount of money involved.
Construction Spending - It measures the amount of spending towards innovative construction, released monthly by the U.S. Department of Commerce's Census Bureau.
Contract - An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).
Contagion - The tendency of an economic crisis to widen or to spread from one market to another. In 1997, political unsteadiness in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion reach to other Asian emerging currencies, and then to Latin America, and at present it is known as the 'Asian Contagion'.
Conversion - The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.
Convertible currency - A currency that can be freely exchanged for another currency (and or gold) without special authorization from the central bank.
Correspondent Bank - The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.
Counters Currency - The second scheduled Currency in a Currency Pair.
Counterpart - A partaker in a financial transaction.
Counterparty - The other organisation or party with whom the exchange deal is being transacted.
Countervalue - Where a person buys a currency against the dollar it is the dollar value of the transaction.
Cover - (1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.
Covered Margin - The interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.
Country Risk - The Risk related with a cross-border transaction, including however not limited to legal and political conditions.
Credit Risk - Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.
Cross Currency Pairs - A pair of currencies that does not incorporate the U.S. dollar. For instance: EUR/JPY or GBP/CHF.
Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.
Cross rates - Rates between two currencies, neither of which is the US Dollar.
Currency - Any form of cash issued by a government or central bank and used as legal tender and a basis for trade.
Currency Pair - The two currencies that put together up a foreign exchange rate. For instance, EUR/USD
Currency Risk - The risk that shifts in foreign exchange rates can undermine the dollar or any other foreign currency worth of overseas investments.
Currency symbols
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Franc
EUR - Euro
GBP - British Pound
JPY - Japanese Yen
Current Account - The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.
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