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| Dictionary for Exchange Rate Marke |
A Accrual – During a transaction period, the premium or discount distributed by forward foreign exchange is directed related to interest arbitrage transaction. Adjustment – An official activity used to adjust internal economic policies to amend income and expense or currency interest rates. Appreciation – When prices rise according to market requirements, a currency is considered to be revaluated so that capital value is increased. Arbitrage – Through using hedging prices of different markets, buying or selling credit tools and meanwhile in the corresponding market buying money position of the same amount but of reversed direction to gain profit out of tiny price difference. Ask (Offer) Price – The Ask price of an appointed currency in a foreign exchange transaction contract or cross currency transaction contract. At this price, traders buy base currency. It is usually on the right part of a quotation. For example, in USD/CHF 1.4527/32, the Ask price is 1.4532, meaning USD 1 can be bought using CHF 1.4532. At Best – An indication telling traders the best Bid price/ Ask price. Current or Better Price- A transaction is done with a specific or a more ideal exchange rate. B Balance of Trade – A periodical record of foreign trade acknowledged by a country, including movement of products, services and capital. Bar Chart – A chart composed of 4 protuberant spots. The highest price and the lowest price make up a vertical bar. The left side of the bar is marked as the opening price by a horizontal line and the right side is marked as the closing price. Base Currency – A currency that is referential to other currencies quotation. It indicates the value of a currency compared with another. For example, USD/CHF quotation is 1.6215 means USD 1 is worth CHF 1.6215. In foreign exchange market, US dollar is usually considered as the base currency in quotation. The expression is a unit of one currency worthy of USD1 is equal to different units of another currency. The main exceptional currencies are GBP, EUR and AUD. Bear Market – The market with the feature of long-term falling prices. Bid Price – The price at which a market buys a currency in a foreign exchange transaction contract or in a cross currency transaction contract. At this price, a trader can sell base currency. It is the left part of a quotation. For example, for USD/CHF 1.4527/32, the Bid price is 1.4527, meaning CHF 1.4527 can be bought through selling USD 1. Bid/Ask Spread – Difference between Bid price and Ask price. Big Figure Quote – A dealers’ terminology, meaning the first several figures. All these figures rarely change in normal market fluctuation; therefore they are omitted in dealers’ quotations, especially in frequent market activities. For example, USD/JPY exchange rate is 107.30/107.35. However, in verbal quotation the first figures aren’t there with only "30/35" quoted. Book – In professional trading environment, a book is the overall information of all positions of dealers or counters. Agent – Individuals or companies as agents that serve as bridge between buyers and sellers in pursuit of handling charge or commission. Compared with this, dealers manage capital and purchase one end of position in hope of gaining price difference (profit) in the coming transaction through selling the position to another party. 1944 Bretton Woods Agreement – This agreement set fixed foreign exchange rates of main currencies, stipulated that central banks interfered currency markets and fixed gold price as USD 35 / ounce. This Agreement had been valid before 1971. Bull Market – The market with a feature of long-term uprising prices. Bundesbank – Germany Central Bank. C Cable – A dealers' jargon for GBP, meaning the exchange rate of GBP against USD. From the middle of 18th century, exchange rate information began to be transmitted through cross-Pacific cable. Therefore this jargon was spread. Candlestick Chart – A chart showing the extent of the current knockdown price, opening price and closing price. If the closing price is lower than the opening price, this rectangle will become dark or filled. If the opening price is higher than the closing price, this rectangle will not be filled. Cash Market – A market in which futures or option is the financial tools for operation. Central Bank – A government or quasi-governmental organization that manages currency policies of a country and print currency. For example, the United States Central Bank is a federal reserve and Germany Central Bank is a federal bank. Chartist – A person who uses diagrams and figures to explain historical data to discover a tendency, predict future trend and to assist in technical analysis. He or she can also be called as technical dealer. Cleared Funds – Cash that can be used instantly. It is used to pay in a transaction. Closed Position – Foreign exchange transaction no longer exists. The closing process is selling or buying a currency to counteract the current transaction of the same amount. This is an on-balance account. Clearing – The process of finishing a transaction. Contagion – The tendency of economic crisis spreading from one market to another. The 1997 financial vibration in Collateral – A valuable thing used as loan guarantee or to execute a guaranty. Commission – Transaction charge collected by brokers. Confirmation – Trading documents exchanged between the two trading parties to confirm all the clauses in trading. Contract – The standard unit in foreign exchange transaction. Counter Currency – The second currency in a currency pair. Counterparty – One of the participants in a foreign exchange transaction. Country Risk – Risks related to governmental interference (excluding central bank interference). Typical examples include legal and political incidents like wars or domestic chaos. Cross Currency Pairs or Cross Rate – A transaction of two foreign exchanges, for example, EUR/GBP. Currency symbols AUD – Australian Dollar CAD – Canadian Dollar EUR – Euro JPY – Japanese Yen GBP – British Pound CHF –Swiss Franc Currency – A trading unit of a country issued by the government or the central bank of the country. It is used as a legal currency in trade. Currency Pair – An exchange rate composed of two currencies in foreign exchange contraction, for example EUR/USD. Currency Risk – The risk of incurring loss due to change of exchange rate in reversed direction.
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