In the event that you’re looking forward to taking part in the currency futures trade, it is essential to take note that trading is allowed only during working days, that is, from Monday through Friday, and between 9:00 am to 5 pm.
There is no doubt that any business which is prone to risks associated to foreign exchange will need a facility to hedge against the same. Just as n MCX-SX, exchange traded-currency futures are certainly nothing short of a powerful tool for hedging thanks to greater transparency, accessibility, liquidity, and counterparty guarantee. Anything that is healthy for the growth of the national economy will definitely be good for any business especially given the fact that the economy is composed of business of all sizes.
There are a number of political and economic issues that normally affect the curreny prices. But that said and done, the interest rates, inflation, political stability and international trade are among the common conditions that determine the currency prices. In some instances, some governments take part in foreign exchange markets in order to manipulate the value of their currencies. They can decide to flood the market in question with their particular domestic currency with the hope of lowering the price. This is commonly referred to as central bank intervention.
Yes, it definitely does, especially if an individual is looking forward to investing only as nothing more than an investor. You take advantage of the fluctuations in exchange rates to reap big and make huge profit margins just the same way you would by investing in the stock market and equities. However, it is important to point out that you can run into losses in the event that the movements go contrary to what you had anticipated. It is an open secret that taking part in a currency futures exchange is quite a risky venture, just like in any other market.
Therefore, one should actually be very informed as far as the currency market is concerned before making their investment. You can contact us if you’ve made up your minds and want to learn the much needed technical analysis on how you will make profits even in the face of falling and rising markets. We’re ready and more than willing to help you out on this.
Yes. Usually, the lowest amount of the USDINR futures contracts is normally equal to USD 1,000. Equally, EURINR futures contract is equal to EURO 1000. On the other hand, GBPINR futures contract is equal to GBP 1000. Lastly, JPYINR futures contract is equal to YEN 1,00,000. Almost all small traders can afford these. All Exchange transactions are anonymous and are processed based on the time price while making sure that the best price is offered to businesses regardless of how big or small they are. The profit/losses in the futures market are normally collected daily.
Initially, it is the USDINR currency pair only that was traded on MCX-SX. However, the changing and growing appetite of various participants has forced regulators to allow MCX-SX to facilitate the trade of some of the major currency pairs such as GBPINR, JPYINR and EURINR future contracts.
There are many benefits that you can reap from trading Currency Derivatives apart from it being a very effective tool in risk management.
The benefits include but are not limited to the following:
- Speculation – You can use the Currency Futures to speculate on the possible short term markets’ movement. For example, in the event that you believe that the oil prices will go up and consequently affect the national import bill of India, you can decide to buy USDINR hoping that the INR will depreciate. You can alternatively sell the USDINR if you’re indeed convinced that the INR will appreciate for one reason or the other.
- Hedging – You can hedge possible losses while at the same time protecting your foreign exchange exposure simply by making sure that you’ve put in place appropriate positions. For instance, in the event that you’re importing and making your payments in USD in a future date, you can hedge against any foreign exchange losses simply by buying USDINR. You’ll also need to fix or rather place your pay rate today.
You can decide to hedge in case you think that the USDINR will depreciate. At the same time, it would be wise for a borrower to hedge foreign currency (FCY) loans for interest and principal payments and exporters to hedge their future receivables.
- Leverage – You can pay a certain percentage value as an alternative of the whole value, something which will allow you to trade in your currency derivatives.
- Arbitrage – You can take advantage of the current currency exchange rate in various markets and make yourself some really good profits.
A spot market is a market that is basically involved in the current prices of any financial instrument. Chicago Mercantile Exchange (CME), MCX-SX, National Stock Exchange (NSE), BSE, all of which are good examples of Futures markets, give currency futures contracts with varying delivery dates. The dates can run into a number of months into the future. Settlements of a FOREX spot transaction must be completed in two working days.
The word “Derivatives” simply means that something has no independent value. In other words, it borrows its value from some other underlying. The underlying can be indices from the stock market, securities, commodities, currencies, or even bullion among many other things. The derivatives are products that are unique and come in handy in when hedging a portfolio against any future risks. Derivatives are also used for speculation and arbitrage purposes as well.
The last day of trade of futures contracts on MCX-SX is two working day before the last working day (with the exception of Saturdays) of that particular month. The settlement price is the Reserve Bank of India’s reference rate on the last trading day.
The size of the EURINR futures contract is equal to EURO 1,000, USDINR futures contract is usually equal to USD 1,000, JPYINR future contract is YEN1,00,000 and GBPINR futures contract is equal to GBP 1,000. The contracts shall take 12 months maximum to mature. Additionally, keep in mind that monthly maturity, that is from one month to twelve months are also available.
Johannesburg Stock Exchange, Chicago Mercantile Exchange (CME), Euronext, Tokyo Financial Exchange and BM&FBOVESPA are some of the international exchanges that facilitate the trade of currency futures.
There are two major groups in the Foreign Exchange trade. Companies as well as governments make up almost 5 to 10 percent of the daily transactions in the Foreign Exchange trading. They either sell or buy services and products from or in foreign countries and, as such, they must convert any profits that they make in foreign currencies into their own domestic currencies as they go about the business. Basically, this can be said to be a hedging activity.
On the other hand, the remaining 90 to 95 percent includes investors who are trading to make profits or for speculation. In most cases, large banks that trade 10,000,000 million currency units, or even more, make up a large percentage of speculators. Today, exporters and importers, multinational corporations, international portfolio managers, day traders, speculators, hedge funds and long-term holders all make use of the FOREX market in not only paying for services and goods but also in transacting any financial assets. Speculators typically make profits by simply guying one pair of currency while selling another simultaneously. Those hedging, on the other hand, trade in order to protect their margin on any international sale in case of any adverse fluctuations of currencies.
There are many reasons tied to this issue. When the export earnings of any country goes up, foreign exchange supply will certainly increase as well. On the other hand, an increase in imports will also lead to increased demand. These are just among the many objective reasons. Other subjective reasons include how the national economy is expected to perform, how confident people are of a country’s economy and the various viewpoints of the many market participants to name but a few.