Quoting in fixed units of foreign currency against variable
amounts of the domestic currency.
Devaluation
The depreciation of the national currency, or in other
words, the rate decline in relation to foreign currencies and gold. For example,
in Britain in September 1992 raising interest rates in the situation of
stagnation in the economy were the reason for the devaluation of the pound. On
September 16 the pound lost 2.7% against the Mark and by the evening was traded
in New York at 2.703.
Deutsche Akzien Index(DAX 100)
Major German stock index. It is calculated as the average of 100 top German companies.
Dealer
A company or individual, playing in the market at their own expense
and on their behalf, that is, investing their own money, selling/buying a
currency or other assets on their own.
Day trading
Refers to a style or type of trading where trade positions are
opened and closed during the same day.
Currency risk
The risk that shifts in foreign exchange rates may undermine
the dollar or any other foreign currency value of overseas investments.
Currency pair
A conversion operation object based on the
change of one currency rate against another. The example of the currency pair is
USD/JPY.
Currency Intervention
Central bank intervention in the operations on the
currency market in order to raise or lower the rate of the national currency by
selling/buying foreign currency. A reduced rate of the national currency can be
achieved through the purchase of foreign currency; increased rate is achieved
through foreign currency sales.
Currency basket
A selection of foreign currencies, which is used as a guiding
line by regulative institutions when shaping a national currency rate against
other currencies.
Currency
Money issued by a government. Coins and paper money. It is a form of
money used as a unit of exchange within a country.
Correspondent bank
The foreign banks representative who regularly performs
services for a bank which has no branch in the relevant centre, e.g. to
facilitate the transfer of funds. In the US this often occurs domestically due
to inter state banking restrictions.
Consumer Price Index (CPI)
US index, calculated once a month. It indicates
the price dynamics of the basket purchased by an average consumer. One of the
most important inflation indicators.
Closing market rate
The rate at which a position can be closed based on the
market price at end of the day.
Closing a position
The process of selling or buying a foreign exchange
position resulting in the liquidation (squaring up) of the position.
Chartist
A person who attempts to predict prices by analyzing past price
movements as recorded on a chart.
Central bank
A bank, administered by a national
government, which regulates the behavior of financial institutions within its
borders and carries out monetary policy.
Buy on margin
The process of buying a currency pair where a client pays cash
for part of the overall value of the position. The word margin refers to the
portion the investor puts up rather than the portion that is borrowed.
Bull
A market participant counting on the market price increase; a market
operator, a trader or an investor who speculates for the rise.
Broker
An agent, who executes orders to buy and sell currencies and related
instruments either for a commission or on a spread. Brokers are agents working
on commission and not principals or agents acting on their own account. In the
foreign exchange market brokers tend to act as intermediaries between banks
bringing buyers and sellers together for a commission paid by the initiator or
by both parties. There are four or five major global brokers operating through
subsidiaries affiliates and partners in many countries.
Bretton Woods Agreement
The treaty signed by the first members of the UN in
1944, which has set fixed exchange rates for major currencies giving central
banks the right to intervene in foreign exchange markets as well as the price of
gold at the level of 35 USD per ounce. The agreement has been in force until
1971.
Bretton Woods
The site of the conference which in 1944 led to the
establishment of the post war foreign exchange system that remained intact until
the early 1970s. The conference resulted in the formation of the IMF. The system
fixed currencies in a fixed exchange rate system with 1% fluctuations of the
currency to gold or the dollar.
Big figure
The first two or three digits of a foreign exchange price or rate.
Examples: USD/JPY rate of 78.05/10 the big figure is 78. USD/INR price of
46.25/30 the big figure is 46.
Bear
A market participant counting on the market price decrease; a market
operator, a trader or an investor who speculates for the fall.
Basis Point
The security profit change of 0.01%. E.g. the decrease of an
interest rate from 5% to 4.5%, means the loss of 50 basis points.
Base interest rate(benchmark interest rate)
A minimal interest rate set and published by commercial banks for accumulating interest on different credit types.
Base currency
In terms of foreign exchange trading, currencies are quoted in
terms of a currency pair. The first currency in the pair is the base currency.
The base currency is the currency against which exchange rates are generally
quoted in a given country. Examples: USD/JPY, the US Dollar is the base
currency; EUR/USD, the EURO is the base currency.
Bank Rate
The rate at which a central bank is prepared
to lend money to its domestic banking system.
Back office
The office location, or department, where the processing of
financial transactions takes place.
Ask
The price at which a currency pair or security is offered for sale; the
quoted price at which an investor can buy a currency pair. This is also known as
the "offer", "ask price", and "ask rate".
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