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By representation By reversibility national foreign collective reversible partially reversible irreversible

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The national currency is the monetary unit of a country. For example, pound sterling (United Kingdom), peseta (Spain), forint (Hungary), escudo (Portugal), ruble (Russia). Foreign currency is banknotes foreign countries, as well as various means of payment (bills, checks, etc.) denominated in foreign monetary units. For example, foreign currencies for Russians are euro, dollar, shekel. A collective currency is an artificially created international currency used for settlements among a certain circle of states and organizations. So, for members of the IMF and a number of international institutions in 1970, such a non-cash currency unit as the SDR was established. Within the framework of the European Monetary System, until recently, the ECU was widely used, and since 1999 the euro.

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Convertible currencies or convertible (freely convertible-hard currency). These are the currencies of economically strong countries (US and Canadian dollars, Japanese yen etc.) Irreversible currencies (non-convertible). These are closed currencies isolated from the world. Prohibition of free purchase and sale, import and export of currency valuables, strict rationing of exchange when traveling abroad, etc. (in the Soviet Union and other socialist countries). Partially convertible currencies (partially convertible). Those. exchange not for all, but only for a part of foreign currencies; regulation of the volume of export of gold, banknotes and valuable papers; restrictions on money transfers, payments abroad.

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Fixed exchange rate The Central Bank sets the official rate national currency, fixing the content of its currency in other monetary units and the limits of free fluctuation of the exchange rate. When the price of a currency approaches the upper or lower limit of these limits, the Central Bank intervenes in the foreign exchange markets. Exchange rate (cents per mark) S S’ Su D 73 71 70 69 E Number of marks. . The mark rate settled at point E. The volume of stamp sales by the Central Bank during the intervention in the foreign exchange market amounted to Su (as a result, the stamp supply curve will shift to position S’). The bank paid off the excess of demand over supply within fixed limits (from 71 to 69 cents per mark).

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"managed floating" Free floating (flexible) exchange rate This is an exchange rate system that excludes any intervention of the Central Bank in the process of establishing an equilibrium exchange rate in the foreign exchange markets. This system provides for the possibility for the Central Bank to intervene in the foreign exchange market in order to smooth out unwanted fluctuations in the exchange rate. In this case, the exchange rate is not rigidly fixed, but if it rises or falls too much, the Central Bank will, respectively, sell or buy up its own currency in exchange for a foreign one in order to lower or increase the national currency rate. "Managed floating" can be in the form of: a) "currency corridor", b) "sliding peg", c) "dirty floating".

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Official lowering of the national exchange rate by the state monetary unit, i.e., an increase in the amount of national currency that can be obtained for each unit of foreign currency. An official increase by the state of the exchange rate of the national currency, i.e., a decrease in the amount of national currency that can be received for each unit of foreign currency.

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Factors influencing the formation of the exchange rate The ratio of the volumes of mutual exports and imports between countries, which forms the supply and demand for currency inflation The behavior of speculators in the foreign exchange markets who receive income from changes in exchange rates

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1. You are going abroad. You need to exchange 10,000 rubles for Dutch guilders. The exchange rate of the guilder to the ruble in Russia is 17 rubles per guilder. The dollar to ruble exchange rate in Russia is 28 rubles per dollar. And the exchange rate of the dollar to the guilder in Holland is 1.7 guilders per dollar. What is more profitable: to exchange rubles immediately for guilders or first for dollars. And then to the guilders? 2. You need to exchange dollars for rubles. In the first exchange office, the currency purchase rate is 28.40 rubles per dollar, no commission is charged. In the second exchange office, the purchase rate is 28.45 rubles per dollar. But for the operation of buying currency, a commission of 5 rubles is charged. At what point is it more profitable for you to exchange currency if you change 50 dollars? 100 dollars? 200 dollars?

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* How is the monetary policy of the Central Bank related to its internal monetary policy? 3. Germany exports cars to the US for DM 30,000. The US exports cars to Germany at a price of $20,000. If the exchange rate is 1 mark = $0.5, then the price of a German car in the US will be $15,000 and the price of an American car in Germany will be 40,000 marks. If the exchange rate changes to 1 mark = $0.6, what will be the price of a German car in the US and an American car in Germany? How will the price of German exports in the US market and the value of US imports in Germany change?

The most important feature of international trade in comparison with domestic trade is that it is served by different monetary units, that is, different national currencies.
At the same time, each country requires that all settlements on its territory be carried out only in the national currency. Because of this, international trade always requires solving problems of a twofold nature related to: the organization of the actual sale and purchase of goods; currency support for trade operations.
For example, when exporting copper to Europe, Russian firms buy it domestically, paying in rubles. And on the world market they sell for dollars. To continue their operations in Russia, they need to convert the proceeds back into rubles. Thus, the exporting company has to solve two problems: the sale of goods abroad and the transfer of proceeds into the national currency, moreover, in such a way that it is possible to cover all costs and remain profitable.
Why create such currency obstacles in the way of international trade, if all countries are interested in its development7 There are several reasons for this: the presence of a national currency makes it easier for the government to find funds for settlements with those who receive money directly from the state. These include employees, including the army, the poorest citizens and firms that supply goods and services for government needs. As a last resort, the state can simply issue additional paper marks; the presence of a national currency allows the state to manage the course of affairs in the country's economy; the national currency allows you to ensure the full sovereignty of the country, its independence from the will of the governments of other countries, the presence of its own currency helps to avoid inflation, which can be "sick" currencies of other countries
To conduct international trade in the conditions of the existence of different currencies, mankind has created a mechanism for mutual settlements between citizens and firms of different countries. It is commonly referred to as the foreign exchange market.
The basis of this mechanism is the proportions of currency exchange, called exchange rates.
Currency (exchange) rate - the price of one national monetary unit, expressed in monetary units of other countries.
As in any market, prices in the foreign exchange market depend on the supply and demand for a particular currency. The size of supply and demand in the foreign exchange market depends primarily on the volume of mutual trade between countries.
The more, say, the dollar amount that Japanese firms made from selling their goods to the United States compared to the amount of yen that Americans made when they sold their goods on the Japanese market, the more dollars would have to be paid for each yen. In other words, the higher the price of the yen, expressed in dollars, that is, the exchange rate of the yen against the dollar (and the dollar exchange rate, respectively, is lower).
Thus, the main factor in the formation of exchange rates is the ratio of volumes of mutual exports and imports between different countries.
In Russia, however, another factor influences the formation of foreign exchange rates - inflation. In 1992-1997 the purchase of foreign currency (US dollars and German marks) became for Russians one of the main ways to save their savings from inflation, since the dollar was constantly growing (although it lagged behind ruble inflation). spending by Russians is about 21%.
It was during these years in our country that the dollar exchange rate depended only to a small extent on mutual trade between Russia and the United States. In reality, this exchange rate was the price of a very special product called “saving savings from inflation.” And therefore, the dollar exchange rate changed precisely under the influence of how incomes changed Russians and domestic firms, how much free funds they had
Fluctuations in exchange rates directly affect all citizens of the country, although they are not always immediately aware of it. The more a country is included in the international division of labor, the more actively it trades on the world market, the more the well-being of its citizens depends on the exchange rates of the national currency. Moreover, the influence of exchange rates is extremely contradictory.
For example, the depreciation of the ruble (an increase in the amount of rubles that must be paid, say, for the purchase of one dollar) leads to an increase in ruble "prices of imported goods, a decrease in the circle of people able to buy them and, accordingly, a reduction in imports to Russia. For Russians and the opportunity to go abroad on tourist trips, for treatment or study - with constant foreign exchange expenses for these purposes, their ruble equivalent is becoming more and more.
On the other hand, the depreciation of the ruble improves the conditions for the export of Russian goods Firms that produce and export these goods receive large incomes and can expand their activities, hire new employees, raise wages More tax revenues will also go to the state budget.

More on the topic Foreign exchange market and currency convertibility:

1. 2. Basic concepts of the world currency system: currency, exchange rate, currency parities, currency convertibility, currency markets, currency exchanges
2. 5.2. Currency protectionism and liberalization. World experience of transition from currency restrictions to currency convertibility

The most important feature of international trade in comparison with domestic trade is that it is served by different monetary units, that is, different national currencies.

At the same time, each country requires that all settlements on its territory be carried out only in the national currency. It is only in this currency that the taxable income of domestic firms that have sold their goods abroad is determined. Because of this, international trade always requires the solution of problems of a twofold nature, related to:

1. organization of the actual purchase and sale of goods;
2. currency support for trade operations.

So, when exporting their flowers to the USA, a Colombian trading company buys them domestically, paying in pesos, and sells them in America for dollars. Thus, the exporting company has to solve two problems: the sale of flowers and the transfer of proceeds into the national currency, and so that it is possible to cover all costs and remain profitable.

Why create such currency slingshots in the way of international trade, if all countries are interested in its development? There are several reasons for this:

1. the presence of a national currency makes it easier for the government to find funds for settlements with those who receive money directly from the state. These include employees, including the army, the poorest citizens and firms that supply goods and services for government needs. As a last resort, the state can simply issue additional paper marks;
2. the presence of a national currency allows the state to manage the course of affairs in the country's economy;
3. the national currency makes it possible to ensure the full sovereignty of the country, its independence from the will of the governments of other countries;
4. having your own currency helps to avoid the "skidding" of inflation, which "sick" the currencies of other countries.

To conduct international trade in the conditions of the existence of different currencies, mankind has created a mechanism for mutual settlements between citizens and firms of different countries. It is commonly referred to as the foreign exchange market.

The basis of this mechanism is the proportions of currency exchange, called exchange rates and representing the price of national currencies. Simply put, the exchange rate is the number of banknotes of other countries that must be paid in order to buy one monetary unit of a certain country.

Currency (exchange) rate- the price of one national monetary unit, expressed in monetary units of other countries.

For example, at the end of January 2005, the following cross-rates (mutual prices) of currencies were formed on the world currency market:

This means that 1 US dollar cost (i.e., to buy it, you had to pay so much in this national currency):

• in British pounds - 0.564 pounds;
• in euros - 0.824 euros.

In Russia, 1 dollar was worth 28.049 rubles at that moment.

And accordingly, let's say, 1 euro cost 1.209 dollars in dollars, i.e., to buy it, you had to pay 34.109 rubles.

But what determines exchange rates? What factors lead to absolute value exchange rate, for example, the dollar, expressed in rubles, say, 41.7 times higher than in British pounds sterling?

For many centuries, the world economy solved this issue very simply. Recall that the basis of national monetary systems two noble metals served: gold and silver. Many countries minted their coins from these metals. And therefore, the exchange of currencies of different countries was simply based on the weight of the noble metal contained in them (which is why money changers are depicted with scales in their hands in the paintings of ancient masters).

When coins began to be squeezed out of circulation by paper money, the task of exchanging national currencies became more difficult. To solve it, the system of the so-called gold standard was invented, which existed for about half a century - from 1879 to 1934.

"Gold standard"- a mechanism for the exchange of national currencies in proportion to the weight of gold, which was declared as security for the face value of banknotes.

At the same time, the idea of ​​forming the proportion of currency exchange was still the same - "for gold". Only instead of the real circulation of gold, we receive the circulation of its representatives - paper money. During the era of the "gold standard", the proportions of currency exchange were unchanged, or, in other words, the exchange rate was fixed. At the same time, governments at first even took upon themselves the obligation to guarantee the exchange of paper money for gold coins at the request of citizens.

The trouble with the "gold standard" system was that, in the face of inflation, citizens preferred to immediately turn depreciating paper money into gold. That is why the operation of the classical system of the "gold standard" was suspended with the outbreak of the First World War. The governments of the warring countries were forced to sharply increase their spending by issuing unsecured paper money, which immediately caused violent inflation. True, after the end of World War II, another attempt was made to revive, albeit in a modified form, the “gold standard” system. But in the early 70s. the idea of ​​linking exchange rates with the gold backing of paper money has finally lost its appeal to the leading countries of the world.

The remains of the “gold standard” idea survived the longest in the USSR: from 1950 to 1992, the ruble was officially equated to 0.222168 grams of pure gold.

Worldwide rejection of the "gold standard" led to the birth in the 70s. a powerful foreign exchange market, in which exchange rates began to form under the influence of supply and demand for a particular currency.

The size of supply and demand in the foreign exchange market depends primarily on the volume of mutual trade between certain countries. Knowing this, we can schematically represent the model of the birth of the foreign exchange market. This model is shown in fig. 15-2.

Rice. 15-2. The mechanism of the emergence of the foreign exchange market

With the help of this figure describing the trade and currency relations between the US and Japan, we can see that the participants in this market are:

• Japanese firms that exported their goods to the United States and received dollars for them there. But in order to recover their costs in their home country, pay taxes and distribute profits, they do not need dollars, but yens (unless they are going to buy American goods for import to Japan with the entire amount of dollar proceeds). Consequently, Japanese firms need to turn dollars into yen;
• American firms that exported goods to Japan and received revenue in yen. They now need to turn this proceeds into dollars (convert) in order to bring it into the United States and then use it to support their further activities. After all, the US government does not allow payments in its territory in foreign currencies.

So, US exporting firms have yen but need US dollars to bring them into their country. And their Japanese counterparts have US dollars, but need yen, since this is the only currency recognized in their country. Only the foreign exchange market can satisfy the needs of both groups of exporters, where some want to buy yen for dollars, while others want dollars for yen. Accordingly, in the US foreign exchange market, the Japanese will try to sell the dollars they received and buy yen, and in the Japanese foreign exchange market, the Americans will conduct transactions to sell yen and buy dollars. This means that the demand for yen, denominated in dollars, and the demand for dollars, denominated in yen, will collide in the foreign exchange market.

The more, say, the dollar amount that needs to be converted into yen, compared to the amount of yen offered for sale specifically for dollars (after all, some companies need to sell yen, for example, for euros), the higher the price of the yen, expressed in dollars, t ie the exchange rate of the yen against the dollar.

Thus, the main factor in the formation of exchange rates is the ratio of volumes of mutual exports and imports between different countries. If, for example, there are significantly more American goods sold in Russia than Russian goods are sold in the United States, then the large number of rubles that American exporting firms have to turn back into dollars is countered by a smaller number of Russian exporting dollars that have to be turned into rubles. Then for every dollar you have to pay a few rubles. The greater the gap between the sums of rubles and dollars offered for mutual exchange, the higher the dollar exchange rate, i.e., the price expressed in rubles.

Currency convertibility (reversibility) is the possibility of converting (exchanging) the currency of a given country for the currencies of other countries, they distinguish freely, or completely, convertible (reversible) currencies, partially convertible and non-convertible (irreversible).

Fully convertible "freely usable" according to the terminology of the IMF) are the currencies of countries in which there are practically no currency restrictions on all types of transactions for all currency holders (residents and non-residents) (USA, Germany, Japan, Great Britain, Canada, Denmark, the Netherlands, Australia, New Zealand, Singapore, Malaysia, Hong Kong, Arab oil-producing countries.).

With partial convertibility, the country retains restrictions on certain types of transactions and / or for individual currency holders. If the possibilities of conversion for residents are limited, then convertibility is called external, if non-residents - internal. Most industrialized countries switched to this type of partial convertibility in the mid-1960s.

A currency is called non-convertible if the country has almost all types of restrictions and, above all, a ban on the purchase and sale of foreign currency, its storage, export and import. Non-convertible currency is typical for many developing countries.

Exchange rate - the price (quotation) of the monetary unit of one country, expressed in the monetary unit of another country, precious metals, securities.

For converted currencies, the exchange rate is based on currency parity. However, exchange rates almost never coincide with their currency parity. With an active balance of payments, foreign exchange rates in the foreign exchange market of a given country fall, and the rate of the national currency rises. The opposite occurs when a country has a passive balance of payments. Therefore, in most countries, along with a firm official exchange rate of the national currency, there is also a free one. According to the official parity, settlements are carried out by central national banks and other monetary and financial institutions between different countries and with international organizations. Settlements between individuals and organizations are carried out at a free exchange rate.

Fixing a national currency in a foreign one is called a currency quotation (direct and reverse (indirect)). Direct quotation is the price of foreign currency prevailing in the national market. It shows the amount of the measuring currency per unit of the quoted currency. The reverse (indirect) quotation reflects the number of quoted currency units per unit of the measuring currency. The rate of one currency in relation to another can also be determined through a third currency. In this case, it is called a cross rate. When monitoring the level of the exchange rate, two rates are fixed:

The seller's rate (at which the bank sells the currency);

The buyer's rate (at which the bank buys the currency).

They differ because here foreign exchange transactions are considered as a means of making a profit. The difference between these rates forms the margin.

Exchange Rate Forms

Fluctuating - changes freely under the influence of supply and demand and is based on the use of the market mechanism.

Floating - a kind of exchange rate that fluctuates due to the use of the currency regulation mechanism. Thus, in order to limit sharp fluctuations in the exchange rates of national currencies, which cause unpleasant consequences of monetary, financial and economic relations, the countries that entered the European Monetary System introduced the practice of harmonizing relative mutual fluctuations in the exchange rate.

Fixed - an officially established relationship between national currencies, based on legally defined currency parities. It allows fixing the content of national monetary units directly in gold or US dollars, while strictly limiting fluctuations in market exchange rates within the agreed boundaries (about one percent).

Exchange rate defined as the value of the currency of one country, expressed in the currency of another country. The exchange rate is necessary for the exchange of currencies in the trade of goods and services, the movement of capital and loans; to compare prices on world commodity markets, as well as cost indicators of different countries; for periodic revaluation of foreign currency accounts of firms, banks, governments and individuals.

Exchange rates are divided into two main types: fixed and floating.

Fixed exchange rate fluctuates within narrow limits. floating exchange rates depends on market demand and offers for currency and can fluctuate considerably in value.

Exchange rate- this is the exchange ratio between two currencies, for example, 100 yen for 1 US dollar or 16 Russian rubles for 1 US dollar.

Hypothetically, there are five exchange rate systems:

Free (“clean”) swimming;

Guided swimming;

Fixed rates;

Target zones;

Hybrid exchange rate system.

Thus, in a free floating system, the exchange rate is formed under the influence of market demand and supply. At the same time, the foreign exchange forex market is closest to the model of a perfect market: the number of participants both on the demand side and on the supply side is huge, any information is transmitted in the system instantly and is available to all market participants, the distorting role of central banks is insignificant and unstable.

In a managed float system, in addition to supply and demand, the value of the exchange rate is strongly influenced by central banks countries, as well as various temporary market distortions.

An example of a fixed rate system is the Bretton-Woods currency system of 1944-1971.

The target zone system develops the idea of ​​fixed exchange rates. Its example is the fixation of the Russian ruble against the US dollar in the corridor of 5.6-6.2 rubles per 1 US dollar (in pre-crisis times). In addition, this type can be attributed to the mode of functioning of the exchange rates of the countries participating in the European Monetary System.

Finally, an example of a hybrid exchange rate system is the modern currency system, in which there are countries that freely float the exchange rate, there are zones of stability, etc. A detailed listing of the current exchange rate regimes of various countries can be found, for example, in IMF publications.

Many exchange rates can be classified according to various criteria:

Classification of types of exchange rate.

CRITERION	TYPES OF EXCHANGE RATES
1. Fixation method	Floating Fixed Mixed
2. Calculation method	Parity Actual
3. Type of transactions	Forward deals Spot transactions Swap transactions
4. Setting method	Official Informal
5. Attitude towards parity purchasing power currencies	overpriced Understated Parity
6. Attitude towards the participants in the transaction	Purchase rate Sale rate Average course
7. Accounting for inflation	Real Nominal
8. By way of sale	Cash selling rate Cashless sale rate Wholesale exchange rate Banknote

One of the most important concepts used in the foreign exchange market is the concept of real and nominal exchange rates.

Real exchange rate can be defined as the ratio of the prices of goods of two countries, taken in the corresponding currency.

Nominal exchange rate shows the exchange rate of currencies that is currently in force in the country's foreign exchange market.

An exchange rate that maintains constant purchasing power parity: is the nominal exchange rate at which the real exchange rate remains unchanged.

In addition to the real exchange rate calculated on the basis of the price ratio, you can use the same indicator, but with a different base. For example, taking for it the ratio of the cost of labor in the two countries.

The exchange rate of the national currency may change differently in relation to different currencies over time. So, in relation to strong currencies, it can fall, and in relation to weak ones, it can rise. That is why, in order to determine the dynamics of the exchange rate as a whole, the exchange rate index is calculated. When calculating it, each currency receives its own weight depending on the share of foreign economic transactions of this country attributable to it. The sum of all weights is one (100%). The exchange rates are multiplied by their weights, then all the values ​​obtained are summed up and their average value is taken.

In modern conditions, the exchange rate is formed, like any market price, under the influence of supply and demand. Balancing the latter in the foreign exchange market leads to the establishment of an equilibrium level of the market exchange rate. This is the so-called “fundamental equilibrium”.

The amount of demand for foreign currency is determined by the country's needs for the import of goods and services, the costs of tourists of this country traveling to foreign countries, the demand for foreign financial assets and demand for foreign currency in connection with the intentions of residents to carry out investment projects abroad.

The higher the foreign exchange rate, the less demand for it; the lower the foreign exchange rate, the greater the demand for it.

The amount of foreign currency supply is determined by the demand of residents of a foreign state for the currency of this state, the demand of foreign tourists for services in this state, the demand of foreign investors for assets denominated in the national currency of this state, and the demand for national currency in connection with the intentions of non-residents to carry out investment projects in this state.

So, the higher the exchange rate of foreign currency in relation to the domestic one, the fewer national subjects of the foreign exchange market are ready to offer domestic currency in exchange for foreign currency and vice versa, the lower the exchange rate of the national currency in relation to foreign currency, the greater the number of subjects of the national market is ready to purchase foreign currency.

International financial organizations (IFIs) are created by pooling financial resources by member countries to solve certain problems in the development of the world economy. These tasks can be:

operations in the international currency and stock market with the aim of stabilizing and regulating the world economy, maintaining and stimulating international trade;

interstate loans - loans for the implementation of state projects and financing of the budget deficit;

investment activity / lending in the region international projects(projects affecting the interests of several countries participating in the project both directly and through resident commercial organizations)

investment activity/lending in the field of “domestic” projects (projects that directly affect the interests of one country or a resident commercial organization), the implementation of which can have a beneficial effect on international business (for example, infrastructure projects, projects in the field of information technology, development of transport and communication networks, etc.)

charitable activities (financing of international assistance programs) and financing of fundamental scientific research.

Examples of international financial institutions include the International Monetary Fund, the World Bank, European Bank Reconstruction and Development, International Finance Corporation. All these organizations are actively involved in financing Russian projects.

To carry out their functions, MFIs use the full range of modern technologies for financial and investment analysis and risk management, from fundamental research of a potential investment project (for which, most often, specialized teams or institutions of internationally qualified experts, international audit firms and investment banks are involved) to operations on global stock markets(markets of derivative securities).

The effectiveness of the activities of IFIs largely depends on interaction with the governments and governmental organizations of the participating countries. Thus, the investment activities of MFOs often involve close cooperation with state export credit agencies that provide insurance and risk management for large international projects.

Foreign exchange market and currency convertibility
Any national monetary unit is a currency, it acquires a number of additional functions and characteristics as soon as it begins to be considered not within the narrow framework of the national system of macroeconomic coordinates, but from the position of a participant in international economic relations and settlements.
Currencies and their types

From the point of view of the material form, the currency is any payment documents or monetary obligations expressed in one or another national monetary unit, used in international settlements. Usually we are talking about banknotes, treasury notes, various types of bank accounts, as well as checks, bills of exchange, letters of credit and other means of payment.

These payment documents, denominated in different currencies, are bought and sold on a special market - the currency market. Demand and supply in the national currency market are formed as a result of the collision of monetary claims and obligations denominated in different currencies, mediating the international exchange of goods, services and the movement of capital. For example, an American exporter who sold a batch of computers to Germany for German marks wants to exchange them for the national currency, thereby creating a demand for dollars and a supply of German marks. On the contrary, an American car importer from Germany will offer dollars on the national market in exchange for stamps to pay for his contract.

The demand and supply of currency are also formed in connection with all other transactions that mediate international exchange and are reflected in the balance of payments of any country. We are talking about operations not only export-import (trade), but also non-trade (transport, insurance, tourism, money transfers). wages, pensions, etc.), as well as on the movement of capital, both short-term (including speculative foreign exchange transactions), and medium and long-term (provision and repayment of loans, outflow and inflow of direct and portfolio investments), etc.

Currency convertibility

The national regime for regulating foreign exchange transactions for various types of transactions for residents and non-residents determines the degree of so-called currency convertibility.

From this point of view, all currencies can be conditionally divided into three groups: freely convertible, partially convertible and non-convertible (closed).

The currency of countries where there are no legal restrictions on the performance of foreign exchange transactions for any type of transactions (trading, non-trading, capital movements) for both residents and non-residents is a free convertible and rue m about y (SLE).

Partially convertible are the currencies of those countries where there are quantitative restrictions or special licensing procedures for currency exchange for certain types of transactions or for various subjects of foreign exchange transactions.

Finally, non-convertible or closed currencies are the national monetary units of those countries whose legislation provides for restrictions on almost all types of transactions. The Soviet and even the Russian ruble, in fact, until mid-1992, was a classic example of such a currency.

The fewer restrictions, the more "market" is the mechanism of supply and demand formation in the foreign exchange market, the more perfect its institutional organization.

Currency market

The totality of all relations arising between the subjects of foreign exchange transactions is covered by the general concept of "foreign exchange market". From an institutional point of view, the foreign exchange market is a set of large commercial banks and other financial institutions connected to each other by a complex network of modern communication means (from telephones and telexes to electronic and satellite systems) through which currencies are traded. In this sense, the foreign exchange market is not a specific gathering place for sellers and buyers of currencies. In the foreign exchange market, experienced dealers (for example, employees of a special department of a commercial bank) sit at their workplaces and communicate with dealers of other banks via computers and telephones. Computer displays display the current quotations of the rates of all major currencies, according to which various banks currently trade currencies. Any bank can buy or sell currency at the best rate both at its own expense and on behalf of its client.

The dealer of the buyer's bank contacts the seller's bank directly by phone and concludes the deal. The transaction time, as a rule, ranges from several tens of seconds to two or three minutes. Documents confirming the transaction are sent later, and bank accounts are posted within, as a rule, two working banking days. This form of organization of currency trading is called the interbank currency market.

The vast majority of foreign exchange transactions are carried out in non-cash form, i.e. on current and term bank accounts, and only a small part of the market falls on the trading of coins and the exchange of cash.

In a number of countries, part of the interbank market is organizationally formalized in the form of a currency exchange.

Modern means of communication allow you to trade currency around the clock (excluding weekends). For example, a Western European bank with an extensive branch network around the world can trade dollars in Singapore, Frankfurt am Main, New York and San Francisco, moving operations from one time zone to another.

Thus, at present, we can say that the national currency markets are closely interconnected, intertwined and are an integral part of the global world currency market.
Exchange rates

The ratio of the exchange of two monetary units or the price of one monetary unit, expressed in the monetary unit of another country, is called the exchange rate.

Fixing the exchange rate of the national currency in a foreign one is called a currency exchange rate. At the same time, the rate of the national currency can be set in the form of a direct quotation of 1,10, 100 units. foreign currency = x units. national currency), and inversely quoted 1, 10, 100 units. national currency =head. foreign currency). In most countries, when setting the exchange rate of the national currency, a direct quotation is used, in the UK - a reverse one, in the USA both quotations are used.

In the future, all conclusions about the regularities of the dynamics of exchange rates will be made in relation to direct quotations.

For professional members currency markets just the concept of "exchange rate" does not exist. It breaks down into a buyer's rate and a seller's rate.

The buyer's rate is the rate at which a resident bank buys foreign currency for national currency, and the seller's rate is the rate at which it sells foreign currency. currency for the national.

For example, a quote of $1 = 1.5635/55 DM means that a German commercial bank is ready to buy $1 from a client for 1.5635 marks and sell it for 1.5655 marks.

With a direct quote, the seller's rate is higher than the buyer's rate.

The difference between the seller's rate and the buyer's rate is called the margin, which covers costs and forms the bank's profit on foreign exchange transactions.

It is obvious that any bank is interested in the lowest possible rate of the buyer and the highest possible rate of the seller, and only fierce competition for the client forces banks to act in the opposite direction. Reducing margins and attracting customers allows you to win on the mass of profits.

Exchange rates also differ according to the types of payment documents that are the object of exchange. Distinguish between the course of telegraphic translation, the course of the banknotes, the course of the banknotes (to r s m e n y a l c o n t o r) .

There is the concept of "cr o s s - kur s", which is a quotation of two foreign currencies, neither of which is the national currency of the party to the transaction that sets the rate, for example, the dollar to yen exchange rate set by a German bank. In principle, any rate calculated from the rates of two currencies to a third is a cross rate. Quotes of cross-rates in various national currency markets may differ from each other, which creates conditions for currency arbitrage, i.e. for operations with the aim of making profit from the difference in exchange rates of the same monetary unit in different currency markets.

Finally, exchange rates are differentiated depending on the type of foreign exchange transactions. There are rates of cash (cash) transactions (the "spot" rate), in which the currency is delivered immediately (within two business days) and forward transaction rates (forward), in which the actual delivery of the currency is carried out after a clearly defined period of time.

Let us dwell in more detail on the analysis of the differences between the rates "spot" and "forward" (forward rate). This will allow you to quickly understand the main factors that determine the dynamics of exchange rates.

The rate "spot" is the base rate of the foreign exchange market. It regulates current trading and non-trading operations. The forward rate is set by a participant in a currency transaction, which will actually be carried out after a certain period of time on a fixed date.

For example, if the seller's spot rate on September 1, 1996 in Frankfurt am Main is $1 = DM 1.5655, the three-month forward rate (for delivery on December 1) is $1 = DM 1.5700. This means that the German bank is ready to sell the dollar to the customer for 1.5655 DM for immediate delivery or 1.5700 DM for December 1st delivery. At the same time, it is absolutely not necessary for the bank to have dollars before December. The main thing is that on December 1 he is obliged to sell them to the client at the rate set on September 1, regardless of what the “spot” rate will be in December.

Thus, the forward exchange rate for a period of three months should not be confused with the future spot rate after three months. The forward exchange rate is a kind of “booking” of the exchange rate for a certain date in the future.

The emergence of such a phenomenon as forward exchange rates is ultimately associated with the processes of currency (or interest) arbitrage. Participants in the foreign exchange market carry out operations either for purely speculative purposes or for the purpose of insuring foreign exchange risks. Moreover, the goals of hedgers (those who insure risks) and speculators are directly opposite.

Hedging, or hedging, foreign exchange risks caused by fluctuations in exchange rates is an action aimed at ensuring that neither net assets nor net liabilities in any currency. In financial terms, this means actions to liquidate so-called open foreign currency positions.

There are two types of open positions: a “long” position (net assets in foreign currency, i.e. claims exceed liabilities) and a “short” position (net liabilities, i.e. e. obligations exceed requirements).

Hedging is a normal operation, for example, for exporters and importers, for whom it is more important to focus on a certain exchange rate during the term of a foreign trade contract than to expose themselves to the risk of foreign exchange losses.

Example 37.1. The American exporter is contractually required to pay 1,650,000 DM in three months. At the current exchange rate of $1 = 1.6500DM, this amount is equivalent to $1,000,000. However, if the exchange rate falls by the time of payment, for example, to $1 = 1.5000 DM, the exporter will have to pay $1,100,000, i.e. 10% more than at the time of the conclusion of the contract. If the exporter does not want to expose himself to such a risk, he has the opportunity to insure the transaction either on the "slot" market by buying Deutsche Marks at the current rate at the time of the conclusion of the contract and placing them on a deposit in a German bank, or on the futures market by buying Deutsche Marks for a period three months at the forward rate, keeping dollars on deposit in an American bank. In both options, the exporter clearly knows that in three months he will have the required amount in German marks.

Speculation in the foreign exchange market in a broad sense means actions that are aimed at opening a "long" or "short" position in a foreign currency. In this case, the actions of the foreign exchange market participants are based on a conscious calculation based on an assessment of the future dynamics of the exchange rate, and are aimed at extracting additional profit.

The profitability of speculative operations in foreign currency depends on how much the national currency exchange rate falls above the difference in interest rates on deposits in national currency, on the one hand, and in foreign currency, on the other hand.
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