foreign markets final

7/30/2019 Foreign Markets Final

1/26

Foreign markets


2/26

Foreign Exchange Market

The foreign exchange market allows currencies tobe exchanged in order to facilitate internationaltrade or financial transactions

The foreign exchange market in India started in1978 the government allowed banks to trade witheach other

The foreign exchange market is a global network of

banks, brokers, and foreign exchange dealersconnected by electronic communications systemsit is not located in any one place


3/26

T H E M A J O R S :

7 major currency

:Euro

$ : USD

:JPY

C$ :CSD F :Swiss Frank

A$: ASD

: British pound


4/26

General Features

OTC (Over the counter) market as there is nophysical place where the participants meet toexecute their deals

largest financial market with a daily turnover of overUSD 2 trillion.

24 Hours Market :The markets are situatedthroughout the different time zones of the globe

Physical Markets In few centers like Paris andBrussels, foreign exchange business takes place ata fixed place,


5/26

Participants

Corporates :The business houses, internationalinvestors, and multinational corporations

Commercial banks They buy and sell currenciesfor their clients. They may also operate on their own

Exchange brokers facilitate deal between banks. Inthe absence of exchange brokers, banks have tocontact each other for quotes

Central banks


6/26

Functions of the Foreign Exchange Market

The foreign exchange market is the mechanism bywhich a person of firm transfers

Transfer of Purchasing Power internationaltransactions normally involve different national

currencies, but the transaction can be invoiced inonly one currency

Provision of Credit: the movement of goodsbetween countries takes time, inventory in transit

must be financed. Minimizing Foreign Exchange Risk


7/26

Transactions in the Interbank Market

Spot Transactions: almost immediate delivery offoreign exchange(43 % of all transactions).

Outright Forward Transactions delivery at afuture value date of a specified amount of onecurrency for a specified amount of anothercurrency.

Swap Transactions simultaneous purchase andsale of a given amount of foreign exchange for twodifferent value dates


8/26

Statistics graphical distribution 2001


9/26


10/26


11/26

Panic of 1907, a U.S. economic recession with bank failures

Wall Street Crash of 1929 and Great Depression (19291939)the worst depression of modern history

OPEC oil price shock

Secondary banking crisis of 19731975 in the UK

Japanese asset price bubble (19862003) Bank stock crisis (Israel 1983)

Black Monday (1987)

Savings and loan crisis of the 1980s and 1990s in the U.S.

1991 India economic crisis

Finnish banking crisis (1990s) Swedish banking crisis (1990s)

1994 economic crisis in Mexico

1997 Asian financial crisis

1998 Russian financial crisis

Argentine economic crisis (19992002)
http://en.wikipedia.org/wiki/Panic_of_1907http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929http://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/OPEC_oil_price_shockhttp://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975http://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975http://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975http://en.wikipedia.org/wiki/Japanese_asset_price_bubblehttp://en.wikipedia.org/wiki/Bank_stock_crisis_(Israel_1983)http://en.wikipedia.org/wiki/Black_Monday_(1987)http://en.wikipedia.org/wiki/Savings_and_loan_crisishttp://en.wikipedia.org/wiki/1991_India_economic_crisishttp://en.wikipedia.org/wiki/Finnish_banking_crisis_of_1990shttp://en.wikipedia.org/wiki/Economy_of_Swedenhttp://en.wikipedia.org/wiki/1994_economic_crisis_in_Mexicohttp://en.wikipedia.org/wiki/1997_Asian_financial_crisishttp://en.wikipedia.org/wiki/1998_Russian_financial_crisishttp://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)http://en.wikipedia.org/wiki/1998_Russian_financial_crisishttp://en.wikipedia.org/wiki/1997_Asian_financial_crisishttp://en.wikipedia.org/wiki/1994_economic_crisis_in_Mexicohttp://en.wikipedia.org/wiki/Economy_of_Swedenhttp://en.wikipedia.org/wiki/Finnish_banking_crisis_of_1990shttp://en.wikipedia.org/wiki/1991_India_economic_crisishttp://en.wikipedia.org/wiki/Savings_and_loan_crisishttp://en.wikipedia.org/wiki/Black_Monday_(1987)http://en.wikipedia.org/wiki/Bank_stock_crisis_(Israel_1983)http://en.wikipedia.org/wiki/Japanese_asset_price_bubblehttp://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975http://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975http://en.wikipedia.org/wiki/Secondary_banking_crisis_of_1973%E2%80%931975http://en.wikipedia.org/wiki/OPEC_oil_price_shockhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929http://en.wikipedia.org/wiki/Panic_of_1907


12/26

CONTD..

Late-2000s Financial Crisis or the Late-2000srecession, including:2000s energy crisis

Subprime mortgage crisis

United States housing bubble and United Stateshousing market correction

20082012 Icelandic financial crisis

20082010 Irish banking crisis

Russian financial crisis of 20082009Automotive industry crisis of 20082010

European sovereign debt crisis
http://en.wikipedia.org/wiki/Late-2000s_financial_crisishttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/2000s_energy_crisishttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/United_States_housing_bubblehttp://en.wikipedia.org/wiki/United_States_housing_market_correctionhttp://en.wikipedia.org/wiki/United_States_housing_market_correctionhttp://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Irish_banking_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Irish_banking_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Irish_banking_crisishttp://en.wikipedia.org/wiki/Russian_financial_crisis_of_2008%E2%80%932009http://en.wikipedia.org/wiki/Russian_financial_crisis_of_2008%E2%80%932009http://en.wikipedia.org/wiki/Russian_financial_crisis_of_2008%E2%80%932009http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010http://en.wikipedia.org/wiki/European_sovereign_debt_crisishttp://en.wikipedia.org/wiki/European_sovereign_debt_crisishttp://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010http://en.wikipedia.org/wiki/Russian_financial_crisis_of_2008%E2%80%932009http://en.wikipedia.org/wiki/Russian_financial_crisis_of_2008%E2%80%932009http://en.wikipedia.org/wiki/Russian_financial_crisis_of_2008%E2%80%932009http://en.wikipedia.org/wiki/2008%E2%80%932010_Irish_banking_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Irish_banking_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Irish_banking_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/United_States_housing_market_correctionhttp://en.wikipedia.org/wiki/United_States_housing_market_correctionhttp://en.wikipedia.org/wiki/United_States_housing_bubblehttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/2000s_energy_crisishttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_financial_crisishttp://en.wikipedia.org/wiki/Late-2000s_financial_crisishttp://en.wikipedia.org/wiki/Late-2000s_financial_crisis


13/26

MAJOR DESCRIPTION

Japans "Lost Decade," 1990-2000

The collapse of the Japanese asset bubble in 1991 led to aprolonged period of low growth, which has since beenextended to incorporate the decade since the year 2000. Theoriginal lost decade was caused by an unsustainable level of

speculation, large amounts of credit and low interest rates(sound familiar?). When the government stepped in to controlthis, credit became much harder to obtain, and capitalinvestment dropped significantly. It led to a virtual halt ineconomic expansion during the 1990s, hence the lost decade.

Japan was fortunate in avoiding a depression, but the effectsof 1991 are still being felt, even today. It is a situation thatsome commentators feel could be repeated in Westerneconomies in the near future if care is not taken.


14/26

CONTD..

1907 Banker's Panic

The Panic of 1907 saw the Dow drop almost 50% from the highof the previous year. It was triggered by the usual suspects: over-expansion and poor speculation. The stock market crashed inMarch, and a second crash in October led to a run on banks andevery trust in New York, notably causing the massive National

Bank of North America to fail.

The U.S. Treasury department, with exceptional help from J.P.Morgan and some select executives, raced in with federal moneyand some creative financial redirection. Confidence in themarket had been restored by February 1908, and, in May,Congress passed the Aldrich-Vreeland Act, which created the

National Monetary Commission that later recommended theFederal Reserve Act in an effort to squash any future panicsbefore they were able to do such tremendous damage to theeconomy.


15/26

CONTD..

Black Monday, 1987

No one is entirely certain about the causes of Black Monday,on October 19, 1987. But what is certain is that billions ofdollars were wiped from stock markets across the globe. HongKong lost a massive 45.8% of its value, the United Kingdom

lost 26.4%, Australia dropped 41.8%, and New Zealanddropped a full 60% from its peak.

Some people suggested it was an accident waiting to happen,and theories such as program trading, disputes aboutmonetary policy and fears over inflation have all been

proposed to explain what happened. It could even simplyhave been a panic that spread with no rational explanation.What is certain is that it cost an awful lot of people an awful lotof money.


16/26

CONTD..

Ruble Crisis, 1998

Corruption, an ineffective economic reform policy, thedevaluation of the ruble, and political instability sentRussia into a massive financial crisis as the millenniumcame to a close. Additionally, as the exporter of one-third of the worlds oil and natural gas reserves, Russiawas extremely vulnerable to price fluctuations. Whenforeign investors pulled their money out of the country,the banks were crippled to such an extent that even anIMF loan was largely ineffective. Annual bond yields

stood at a staggering 200%. The crisis also hit the Dow,which suffered one of its biggest point drops in history.


17/26

CONTD..

East Asian Financial Crisis, 1997

The so-called Asian economic miracle turned disastrous inJuly 1997 when investors did what they do so well: lostconfidence, particularly in currencies. High-yield rates made

Asian markets appealing, but when the U.S. tried to stem its

own recession by lowering interest rates, it made itself moreattractive and, as a consequence, the Asian markets lookedtoo risky.

A domino effect followed, beginning in Thailand and spreadingthrough the Philippines, Hong Kong, Indonesia, Malaysia, and

beyond, triggering an unprecedented global crisis. Asianmarkets that had enjoyed some rare prosperity wereslammed: Thailand dipped 75%, Hong Kongs HSI went down23% and Singapore dropped 60%. Not a single global marketwent untouched.


18/26

CONTD..

European Sovereign Debt Crisis, 2009 onward

This is the most recent of the crises on our list, and no one is yet certainabout when, or how, it is going to end. Markets have grown increasinglyconcerned about the ability of nations, particularly Greece, Ireland,Spain, Portugal, and Italy, to pay their debts, and the exposure ofinternational banks to these potentially toxic debts has played a largepart in the enormous market falls of recent days -- some of the worst on

record.

But the sovereign debt crisis, while perhaps initially a European problem,has also spread to the U.S., and wrangling between Republicans andDemocrats over the debt ceiling saw the U.S. have its credit rating cut forthe first time in its history.

The implications of poor economic figures, continued low growth andlarge sovereign debts remain potentially huge. It is not inconceivable thatthis crisis will move further up our list as it continues to play out.


19/26

CONTD..

1973 Oil Crisis

In the midst of the Yom Kippur war of Syria and Egypt againstIsrael, OPEC employed oil as a weapon with the Arab OilEmbargo against those who supported Israel. Crude oil costsrose while production was cut, specifically to the U.S. and theNetherlands.

The embargo lasted only five months, but the effects continuetoday: OPEC member states realized a level of wealthunfathomable only years before; in six weeks shares on theNYSE lost $97 billion in value. Japanese car makers began tocounter the American-made gas guzzlers with smaller cars,

giving them a tremendous market share. The U.S. enacted a55 mph speed limit in an effort to conserve oil, and in 1977,President Carter created the Department of Energy, whichpromptly developed the United States' strategic petroleumreserve.


20/26

CONTD..

The Great Recession

In 2008, the shock collapse of the Lehman Brothers Bank,which held assets worth $600 billion, became the symbolicstart of the most dramatic financial crisis since the GreatDepression. The causes have been attributed variously to thelikes of a deregulated financial sector, poor public monetary

policies and an international economy that was ultimatelybased upon a house of sand, with unsustainable levels of debtin both public and private sectors.

Wherever the responsibility really lies, the effects areundeniable. Between the credit crunch, the stock market

collapse and the ensuing recession, growth in recent yearshas been stunted, unemployment has remained high andgovernments have struggled to retain control over their ownfinances. It was estimated by one financier that by March2009, up to 45% of global wealth had been destroyed. It couldtake years to reclaim it.


21/26

CONTD..

German Hyperinflation, 1918-1924

While the hyperinflation that engulfed Weimar Germany is not the worstin history (see Zimbabwe), it had arguably the most devastating impact.

In 1914, the exchange rate between the U.S. dollar and the GermanMark was about 1 to 4. By 1923, the rate had mushroomed to $1 to 1trillion Marks.

In the aftermath of the First World War, the victors sought reparationsfrom Germany for the cost of the war, worth about one-third of theGerman deficit in this period. Some accused Germany of deliberatelysabotaging its own economy to avoid making these payments.

By introducing a new type of currency in 1923, the Rentenmark, followedby the Reichmark in 1924, Germany did eventually regain control of itsrunaway inflation. But this period almost certainly proved to be crucial inthe rise of National Socialism and all its terrible consequences.


22/26


23/26


24/26

Japan : Tokyo stock market

Founded in May 1878

Total no. of listings : 2292 ; Domestic : 2281 andForeign: 11

It is the third largest stock market in the world.


25/26

USA New York Stock Exchange

Founded March 8, 1817.

Currency :- US $

No. of Listing Co. :- 2800 aprox

First set trading hours were estd in 1873 Crashes over the years effect on the NYSE.

1967 - NYSE admits its first woman member


26/26

foreign markets final

Documents