EURO.uz -The Forex quick guide for beginners and private traders

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The Forex quick guide for beginners and private traders

Fast Market

Rapid movement in a market caused by strong interest by

buyers and/or sellers. In such circumstances price levels

may be omitted and bid and offer quotations may occur too

rapidly to be fully reported.

Fed

The United States Federal Reserve. Federal Deposit

Insurance Corporation Membership is compulsory for Federal

Reserve members. The corporation had deep involvement in

the Savings and Loans crisis of the late 80s.

Fed Fund Rate

The interest rate on Fed funds. This is a closely watched

short term interest rate as it signals the Feds view as to the

state of the money supply.

Fed Funds

Cash balances held by banks with their local Federal

Reserve Bank. The normal transaction with these funds is an

interbank sale of a Fed fund deposit for one business day.

Straight deals are where the funds are traded overnight on

an unsecured basis.

FEDAI

Foreign Exchange Dealers Association of India is an

association of all dealers in foreign exchange which sets the

ground rules for fixation of commissions and other charges

and also determines the rules and regulations relating to

day-to-day transactions in foreign exchange in India. The

FEDAI has recognized 38 currencies for dealing.

Federal National Mortgage

Association

A privately owned, but US government sponsored,

corporation that trades in residential mortgages. Its

activities are funded by the sale of instruments commonly

known as Fannie Maes.

Federal Open Market

Committee See FOMC.

Federal Reserve Board

The board of the Federal Reserve System, appointed by the

US President for 14 year terms. One member of the board

is appointed chairman every four years.

Federal Reserve System

The central banking system of the US comprising 12 Federal

Reserve Banks controlling 12 districts under the Federal

Reserve Board. Membership in the Fed is compulsory for

banks chartered by the Comptroller of Currency, and

optional for state chartered banks.

Financial Future A futures contract based on a financial instrument.

Fine Rate (1) A quote with a narrow spread. (2) The most favorable

rate charged to a high quality borrower.

Firm Quotation

The price given in response to a request for a rate at which

the quoting party is willing to execute a deal for a

reasonable amount, for spot settlement. Screen quotes are

indicative. Quotes on matching systems are normally firm

depending on the system's requirement to reconfirm rate

prior to completing matching.

Fiscal Policy Use of taxation as a tool in implementing monetary policy.

Fixed Dates The monthly calendar dates similar to the spot. There are

two exceptions. For detailed description see value dates.

page 87 of 110

Value Definition

Fixed Exchange Rate

Official rate set by monetary authorities for one or more

currencies. In practice, even fixed exchange rates are

allowed to fluctuate between definite upper and lower

bands, leading to intervention by the central bank.

Fixing

A method of determining rates by normally finding a rate

that balances buyers to sellers. Such a process occurs either

once or twice daily at defined times. Used by some

currencies, particularly for establishing tourist rates . The

system is also used in the London Bullion market.

Flat/Square

Where a client has not traded in that currency, or where an

earlier deal is reversed thereby creating a neutral (flat)

position. For example, you bought $500,000 then sold

$500,000 = FLAT .

Flexible Exchange Rate

Exchange rates with a fixed parity against one or more

currencies with frequent revaluation. A form of managed

float.

Float

(1) See Floating exchange rate. (2) Cash in hand or in the

course of being transferred between banks. (3) The Federal

Reserve Float exists because checks sent to the Federal

Reserve Banks are sometimes credited in advance of the

depositing bank loosing the reserve.

Floating Exchange Rate

When the value of a currency is decided by the market

forces dictating the supply and demand of that particular

currency.

Floor

(1) An agreement with a counterparty that sets a lower

limit to interest rates for the floor buyer for a stated time.

(2) A term for an exchanges trading area (cf. screen based

trading), normally the trading area is referred to as a pit in

the commodities and futures markets.

FOMC

Federal Open Market Committee, the committee that sets

money supply targets in the US, which tend to be

implemented through Fed Fund interest rates etc.

Foreign Exchange The purchase or sale of a currency against the sale or

purchase of another.

Foreign Position

A position in which one party agrees to purchase from or

sell to the other party an agreed amount of foreign

currency.

Forex An abbreviation of foreign exchange.

Forex Deal

The purchase or sale of a currency against the sale or

purchase of another currency. The maximum time for a deal

is defined when the deal opens. The deal can be closed at

any moment until the expiry date and time. For technical

reasons, a deal cannot be closed in its first 3 minutes.

Forward Contract

Sometimes used as synonym for "forward deal" or "future".

More specifically, it referes to arrangements with the same

effect as a forward deal between a bank and a customer.

Forward Cover Taking Forward contracts intended to protect against movements

in the exchange rate.

Value Definition

Forward Deal A deal with a value date greater than the spot value date.

Forward / Forward A forward / forward deal is one where both legs of the deal

have value dates greater than the current spot value date.

Forward Margins Discounts or premiums between spot rate and the forward

rate for a currency. Normally quoted in points.

Forward Maturities Trading days on which day contracts can be transacted later

than the spot date.

Forward Operations

Foreign exchange transactions for which the fulfillment of

the mutual delivery obligations is made on a date later than

the second business day after the transaction was

concluded.

Forward Outright

A commitment to buy or sell a currency for delivery on a

specified future date or period. The price is quoted as the

spot rate minus or plus the forward points for the chosen

period.

Forward Points

The interest rate differential between two currencies

expressed in exchange rate points. The forward points are

added to or subtracted from the spot rate to give the

forward or outright rate, depending on whether the

currency is at a forward premium or discount.

Forward Rate

The rate at which a foreign exchange contract is struck

today for settlement at a specified future date, which is

decided at the time of entering into the contract. The

decision to subtract or add points is determined by the

differential between the deposit rates for both currencies

concerned in the transaction. The base currency with the

higher interest rate is said to be at a discount to the lower

interest rate quoted currency in the forward market.

Therefore the forward points are subtracted from the spot

rate. Similarly, the base currency with the lower interest

rate is said to be at a premium, and the forward points are

added to the spot rate to obtain the forward rate.

Forward Rate Agreements

The FRA is an agreement between two parties that

determines the interest rate that will apply to a notional

future loan or deposit of an agreement.

Free Reserves Total reserves held by a bank less the reserves required by

the authority.

Front Office The activities carried out by the dealer, normal trading

activities.

Fundamental Analysis Analysis based on economic and political factors.

Fundamentals

The macro economic factors that are accepted as forming

the foundation for the relative value of a currency. These

include inflation, growth, trade balance, government

deficit, and interest rates.

Funds

A term for USD/CAD/Fungibles Instruments that are

equivalent, substitutable and interchangeable in law. May

apply to certain exchange traded currency contracts offered

on a number of exchanges.

page 89 of 110

Value Definition

Futures Contract

A contract traded on a futures exchange that requires the

delivery of a specified quality and quantity of a commodity,

currency or financial instruments within a specified future

month, if not liquidated before the contract matures.

Futures Exchange-Traded

Contracts

They are firm agreements to deliver (or take delivery of) a

standardized amount of something on a certain date at a

predetermined price. Futures exist in currencies, money

market deposits, bonds, shares and commodities. They are

traded on an exchange with the clearing corporation

guaranteeing the contract and moreover the trade is done

on a mark to market basis.

 


 

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