Archive : Rates

INTERBANK Deals refer to purchase and sale of foreign exchange between the banks.  In other words, it refers to the foreign exchange dealings of a bank in the interbank market.   Cover Deals Purchase and Sale of foreign currency in the market undertaken to acquire or dispose of foreign exchange required or acquired as a consequence of its dealings with its customers is known as the ‘cover [...]

By definition, the time and amount of foreign exchange to be delivered are predetermined under a forward contract and the customer is bound by this agreement.  So, theoretically, there should not be any variation and on the due date of the forward contract the customer will either deliver or take delivery of the fixed sum of foreign exchange agreed upon.  But, in practice, quite often the delivery [...]

  Some Aspects of Exchange Quotation   Exchange Rates for Non-Trade Transactions   The method of calculation of exchange rates relates to trade-related transactions.  Banks for the following transactions quote separate rates:   1 Issue and encashment of foreign travelers cheques; 2 Purchase of personal cheques; and 3 Purchase of foreign currency notes and coins.   Quoting [...]

  When the bank buys foreign exchange form the customer, it expects to sell the same in the inter bank market at a better rate and thus make a profit out of the deal.  In the inter bank market, the bank will accept the rate as dictated by the market.  It can therefore sell foreign exchange in the market at the market-buying rate for the currency concerned.  Thus the inter bank buying rate [...]

  The foreign exchange dealing of a bank with its customer is known as ‘merchant business’ and the exchange rate at which the transaction takes place is the ‘merchant rate’.  The merchant business in which the contract with the customer to buy or sell foreign exchange is agreed to and executed on the same day is known as ‘ready transaction’ or ‘cash transaction’.  As in the [...]