Interest rate risk is pertinent to currency swaps, forward out rights, futures, and options. It refers to the profit and loss generated by both the fluctuations in the forward spreads and by forward amount mismatches and maturity gaps among transactions in the foreign exchange market. An amount mismatch is the difference between the spot and [...]
In terms of volume, currencies from around the world are traded mostly against the U.S. dollar, because the U.S. dollar is the currency of basis and reference.
The other major currencies are the euro, followed by the Japanese yen, the British pound, and the Swiss franc. Other currencies with significant spot market shares are the Canadian [...]
Currency trading has a long history and it can be traced back to the ancient Middle East and Middle Ages, centuries ago, when the foreign exchange started to take shape after the international merchant bankers devised bills of exchange, which were transferable third-party payments that allowed flexibility and growth in foreign exchange dealings.
The modern foreign [...]
The U.S. Dollar
The United States dollar is the world’s main currency. All currencies are generally quoted in U.S. dollar terms. Under conditions of international economic and political unrest, the U.S. dollar is the main safe-haven currency which was proven particularly well during the Southeast Asian crisis of 1997-1998. The U.S. dollar became the leading currency [...]
The following are the top 3 primary fundamental indicators causing currencies to fluctuate.
The Journal of Commerce Industrial Price Index (JoC)
The Journal of Commerce Industrial price index consists of the prices of 18 industrial materials and supplies processed in the initial stages of manufacturing, building, and energy production. It is more sensitive than other indexes, [...]