currency transactions - are transactions that are settled by international agreements or by national legislation to use of currency values.
types of currency transactions
1. Foreign exchange forward transactions (futures, forward) - this transaction, during which the parties agree on the delivery of a certain amount of currency through due to the period after the completion of the transaction by the exchange rate, which is fixed at the time of conclusion.In currency futures transactions, there are two features.
Exchange rate is fixed at the conclusion of the deal, although it is performed after a certain period of time.
between the conclusion and execution of the transaction there is a time interval.Deadline, ie supply of currency is defined as the end of the period from the date of the transaction or other period during the term.
foreign exchange forward contracts are made:
- to obtain due to exchange rate differences speculative profits;
- when insuring overseas direct or portfolio investments from possible losses due to the depreciation of the currencies in which they are implemented;
- the exchange (conversion) for commercial purposes, that is, advance sale or purchase of foreign exchange earnings for future payments of foreign currency.
Application for currency risk forward transactions at the time of commercial transactions became widespread in the 70s during the transition to floating exchange rates.
2. Foreign exchange transactions of banks "spot" the most common.They make up 90% of the total volume of foreign exchange transactions.Their essence is in foreign currency exchange supply by banks, provided on the second business day after the transaction at the exchange rate, which was fixed at its conclusion.At the same time considered working days in each of the currencies involved in the transaction.That is, if the next day the date of the transaction for a non-working one of the currencies, the currency supply period is greater than one day, and if another currency the next day is not a business, supply is also increased by one day.
In such transactions supply of currency is made on the accounts that are specified by recipient banks.Currency Conversion in two days previously dictated by objective difficulties of its implementation in a shorter time period, also required the analysis of foreign exchange operations of a commercial bank.
most mobile element in the foreign exchange positions of banks are operations on the currency market with the express delivery, but they embody some risk.With operations "SPOT" meets the needs of customers by banks in foreign currency, carried out speculative and arbitrage operations, flow of capital from one currency to another.
3. Transactions "SWAP" are a type of transaction that combines cash foreign exchange transactions of banks.There are similar banking activities from medieval times when Italian bankers to conduct operations with promissory notes.Later, they began to develop in the form of deportnyh and reportnyh operations.Deport - a combination of inter-related transactions in the reverse order report, which carried a cash sale of foreign currency and the purchase of a term.
Later, foreign exchange transactions of banks 'swap' taken the form of the exchange of deposits for the equivalent amount in various currencies.The disadvantage of this operation was to increase the bank's balance sheet, thus creating additional risks and factors worsened.Foreign exchange transactions of banks "swap" to solve these problems, consideration is made on off-balance sheet, which means that currency exchange is carried out in the form of sale.
"swap" combines the purchase and sale of currencies on the condition of immediate delivery to kontrsdelkoy the same currencies for a certain period.On the counter payments negotiated with the two partners (corporations, banks, and others).
