3rd Exchange Rate Fluctutation on 25th Sept to 14 Feb

8/2/2019 3rd Exchange Rate Fluctutation on 25th Sept to 14 Feb

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Exchange Rate Fluctuation from

25th September 2011 to 14thFebruary 2012

Presented by:Nirmal Bam

MBA (FINANCE)

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Objective of Presentation

To know about exchange rate

To understand the causes of exchange rate fluctuation

To know exchange rate impact on export and import

in Nepal

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Outline

Introduction of Forex market

Function/ Uses of Forex

Forex Instruments

Types of Forex market

NepalIndia pegged exchange rate Dollar Fluctuation from 25th September 2011 to 14th

February 2012 (Trend Analysis)

Causes of Exchange rate fluctuation

Exchange rate impact on export and import in Nepal

Flow of Remittance at that time

Conclusion

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Introduction of Forex Market

Forex or FX Market, or Currency Market is the largest

financial market in the world

Is a global, worldwide decentralized financial market for

trading currencies

Is a market for converting the currency of one countryinto that of another country.

Operates continuously 24 hours a day except weekends,

i.e. trading from 20:15 GMT on Sunday until 22:00 GMT

Friday

Average daily turnover in global foreign exchange

markets is estimated at $3.98 trillion

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Function/ Uses of Forex

Currency conversion

To use/consume product or services of particular

country by individuals as tourist

For making payment in international business

For investing in money market instrument denominated

in foreign currency

For speculation by individuals

Insuring against foreign exchange risk Spot Exchange Rate, Forward Exchange Rate and

Currency Swaps (against Transaction Risk, Translation

Risk and Economic Risk)3/10/2012 5


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Forex Instruments

Spot exchange rate :it is the rate at which foreign

exchange dealer s convert one currency into another.

Forward contracts. A standardized contract in which

buyer and seller agree on an exchange rate for any date

in the future.

Currency Futures : A contract that specify the price at

which a currency can be bought or sold at a future date.

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Currency Option : A derivative where the owner has the

right to exchange money denominated in one currency

into another currency at a pre-agreed exchange rate on a

specified date.

Swap: Two parties exchange currencies for a certain

length of time and agree to reverse the transaction at a

later date.

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Types of Foreign exchange

1. Floating exchange rate Exchange rate change as per the market activities in

foreign currency.

Eg. US dollar with Pound

2. Pegged exchange rate

One currency is pegged with another or basket ofsome currencies.

Different rates with currencies in basket.3. Fixed exchange rate

One currency has fixed exchange rate with another.

Eg. INR and Rs.3/10/2012 8


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NepalIndia Fixed pegged exchange rate

Reasons for Nepalese currency fixed with India:

Nepals 65% of trade with India.

Nepals import exceeding export.

Free flow of factors of production.

Illegal currency speculation may take place.

International investors feel secure.

Inflation control.

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Dollar Fluctuation from 25th September

2011 to 14th February 2012 (Trend

Analysis)

77.4

77.6

77.8

78

78.2

78.4

78.6

78.8

79

79.2

9/25/2011 9/26/2011 9/27/2011 9/28/2011 9/29/2011 9/30/2011

Rs.

$ September 2011

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76.5

77

77.5

78

78.5

79

79.5

80

Rs.

$ October 2011

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74

75

76

77

78

79

80

81

82

83

84

85

11/1/2011

11/2/2011

11/3/2011

11/4/2011

11/5/2011

11/6/2011

11/7/2011

11/8/2011

11/9/2011

11/10/

2011

11/11/

2011

11/12/

2011

11/13/

2011

11/14/

2011

11/15/

2011

11/16/

2011

11/17/

2011

11/18/

2011

11/19/

2011

11/20/

2011

11/21/

2011

11/22/

2011

11/23/

2011

11/24/

2011

11/25/

2011

11/26/

2011

11/27/

2011

11/28/

2011

11/29/

2011

11/30/

2011

Rs.

$ November 2011

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79

80

81

82

83

84

85

86

87

12/1/

2011

12/2/

2011

12/3/

2011

12/4/2011

12/5/

2011

12/6/

2011

12/7/

2011

12/8/

2011

12/9/

2011

12/10/

2011

12/11/

2011

12/12/

2011

12/13/

2011

12/14/

2011

12/15/

2011

12/16/

2011

12/17/

2011

12/18/

2011

12/19/

2011

12/20/

2011

12/21/

2011

12/22/

2011

12/23/

2011

12/24/

2011

12/25/

2011

12/26/

2011

12/27/

2011

12/28/

2011

12/29/

2011

12/30/

2011

12/31/

2011

Rs.

$ December 2011

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74

76

78

80

82

84

86

1

/1/2012

1

/2/2012

1

/3/2012

1

/4/2012

1

/5/2012

1

/6/2012

1

/7/2012

1

/8/2012

1

/9/2012

1/10/2012

1/11/2012

1/12/2012

1/13/2012

1/14/2012

1/15/2012

1/16/2012

1/17/2012

1/18/2012

1/19/2012

1/20/2012

1/21/2012

1/22/2012

1/23/2012

1/24/2012

1/25/2012

1/26/2012

1/27/2012

1/28/2012

1/29/2012

1/30/2012

1/31/2012

Rs

.

$ January 2012

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76.5

77

77.5

78

78.5

79

79.5

Rs

.

$ February 2012

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Causes of Exchange rate fluctuation

Casus of dollar rate appreciated at December 2011 Year end presser

Foreign investor take out there investment from

stock market in India Dollar demand is higher than supply

Unstable government policy

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Causes of dollar rate depreciated

Excess supply of dollar in market due to RBI

intervention (every 2-3 week)

Attracted in foreign investor in Indian stock

market

Currency SWAP with Japan

RBI circulate the rule about dollar

Commercial bank can hold up to 10 million

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CAUSES OF FLUCTUATION

Demand and Supply

Speculative

Changes of company board of director

Financial Position of the company

Trade Cycle Political Factors

Government Policies

Oil price in the international market

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USD, AUD, AND EURO EXCHANGE

RATE FLUCTUATION

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0

20

40

60

80

100

120

USD

AUD

EURO


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Exchange rate impact on export and

import in Nepal

Increase inflation

Increase the imported product price

Like Electric, Garment ,Mobile, Computer products

Decreased the L/C opening tend at 20% Increase government revenue

Country exported Rs.30.06 billion and imported

Rs.177.79 billion

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Flow of Remittance

Increase remittances by 37.9% i.e. Rs 133.19 billion

Increase the forex reserve by 35.4% i.e. Rs.368.63

billion which is higher than previous year at same

period

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Conclusion

NepalIndia fixed pegged exchange rate

Nepals 65% of trade with India.

Exchange rate fluctuation also impact on export and

import in Nepal

Increase inflation

Increase government revenue

Increase remittances

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Thank You!

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3rd Exchange Rate Fluctutation on 25th Sept to 14 Feb

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