Forex market statute to be completed by end of July

The forex market statute is scheduled to be completed by the end of July to submit to the State Bank of Vietnam for approval.

Although it is completely agreed that the forex market statute is necessary amidst the current time, there remain some disagreements about some details in this statute.

According to Truong Dinh Song, chief of the banking operation department from Vietnam Bank Association (VNBA), business code of conduct or culture are very necessary in business activities in general and in forex trading activities in particular. Thus, code of conduct in forex trading is considered top criteria in this statute.

Agreeing with the above opinion a representative from Asia Commercial Bank (ACB) said that the regulations on code of conduct remain low, so it is necessary to have more detail regulations in order to promote code of conduct in the market.

Tran Khanh from Dai A Bank-Hanoi branch said that Vietnam's forex market includes two large segments, interbank and transactions between banks and clients. However, the statute mainly promulgates rules in interbank transactions without paying due attention to transaction rules between banks and clients, added Khanh.

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Forex Market Overview

The following facts and figures relate to the foreign exchange market. Much of the information is drawn from the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2007. 54 central banks and monetary authorities participated in the survey, collecting information from approximately 1280 market participants.

U.S. Forex Market Commentary

The euro moved sharply higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4445 level and was supported around the $1.4205 level. The common currency reached its highest level since 21 October 2008 as traders chased riskier and higher-yielding assets. Data released in the U.S. today contributed to investors’ moves to assume more risk. First, the July ISM manufacturing index printed at 48.9, up from the June reading of 44.8. The ISM prices paid component rallied to 55.0 from 50.0 in June and other sub-indices also improved including the production and new orders components. Second, June construction spending rallied to +0.3% m/m from a revised May reading of -0.8% m/m, an unexpected improvement, while activity was off 10.2% y/y. Data released in the U.S. tomorrow include June personal spending and producer price inflation data. In eurozone news, EMU-16 July manufacturing PMI improved to 46.3 from 42.6 in June, more-than-expected albeit still below the “boom or bust” 50.0 level. Germany’s PMI manufacturing result printed at 45.7, up from 40.9 in June. Surprisingly, however, German retail sales were off a real 1.8% m/m and off 1.6% y/y. June producer price inflation data will be released tomorrow. The European Central Bank is expected to keep interest rates unchanged when it convenes on Thursday but there is some chatter the BoE could announce measures regarding an end to its quantitative easing program. Euro bids are cited around the US$ 1.3900 figure.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥95.35 level and was supported around the ¥94.60 level. The yen was off sharply across the board as global risk sentiment continued to strengthen. Another indication of the improving risk appetite was a decline in the so-called TED spread, the difference between what financial institutions and the U.S. Treasury pay to borrow funds for three months, to 29.4 basis points – its lowest level since 26 March 2007. The opposition political party, Democratic Party of Japan, reported “Japan cannot adopt political that would prompt a drastic drop of the dollar or make other changes during a global recession.” The DPJ is mounting a serious challenge to the Liberal Democratic Party’s decades-long stronghold on power and may overtake the LDP at the polls later this month. Data released in Japan overnight saw total cash earnings off 7.1% y/y in the year to 30 June, the largest decline on record and the latest indication of deflationary pressures in the Japanese economy. The Nikkei 225 stock index lost 0.04% to close at ¥10,352.47. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥137.55 level and was supported around the ¥134.55 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥161.80 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.10 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8288 in the over-the-counter market, down from CNY 6.8291. China reported its CLSA PMI figure improved to a twelve-month high.

Indian Forex News-Indian Rupee weakens thanks to Bank Agitation

India Saturday 8 August 2009 : The MCX-SX USDINR August Rupee futures opened on Friday at 47.82. The BSE Sensex opened at 15441, 73 points lower to its previous close. Lower Asian equity markets and two day
banking strike lead to rupee weakening.

Investors would be watching the U.S. non-farm payroll data and Jobs data due later in the evening for further direction. Nifty stocks futures traded in Singapore were down 0.9 % and the MSCI index of Asian stocks outside Japan was trading 1.1 per cent lower.

Global stocks dropped along with metals and oil as U.S. unemployment climbed to a 26-year high last month. The MSCI world Index of 23 developed nations slid 0.4 percent. Futures on the Standard & Poor’s 500 Index fell 0.4 percent.

Afternoon Trade: The MCX-SX August Rupee futures were trading at 47.87 by 3:10 pm where as the BSE Sensex was at 15161, 360 points down from its opening. Dollar Index has rebounded to 78. Investor confidence across Asia was subdued and Indian shares extended losses to 2 percent on Friday afternoon led by bank stocks, taking cues from Europe where banking shares were the biggest losers after RBS posted a first half loss.

Copper slipped for a second day on the London Metal Exchange, and oil was down 1.1 percent in New York. China’s Shanghai Composite Index slid 2.9 percent, driving the benchmark to its worst weekly loss. From the domestic front, worries regarding corporate earnings amid a deficient rainfall were the culprit for heavy losses in equity exchanges.

Closing Trade: The MCX-SX August Rupee futures were trading at 47.98 at 3:45 pm. The BSE Sensex crashed 353 points and closed at 15161. Active MCX-SX INR Aug’09 futures closed at 47.94. Immediate supports are now around 47.65/47.70 followed by 47.20/47.30. Immediate resistance falls around 48.35/48.45 followed by 48.65/48.75 levels.

The MCX-SX INR Aug’09 Rupee futures registered an open interest of 316256 for the session. It registered an increase in volume by 1.43 % over its earlier session.

MCX-SX Sep’09 Rupee futures closed towards 48.04.

INR SPOT: Immediate supports are at 47.40/47.50 followed by 47/47.10. Immediate resistance falls around 48.15/48.25 followed by 48.50/48.60 levels.

Forex Market in India-Bond auction cancelled again, Rupee falls to 47.90 on Saturday 8 August 2009

India Saturday 8 August 2009: For the second time in 2009, RBI has cancelled a bond auction after some state-owned banks stayed away due to an employee strike. The move improved sentiments as it sends a signal that RBI believes yields to be lower than what the market expects. When bond prices rise, yields fall.

Bond prices ended higher on Friday after RBI rescheduled the Rs 12,000-crore auction, with dealers attributing the move to public sector banks staying away from the bond sale due to the strike. They added that traders at private, foreign banks and bond houses made bids at very low and unreasonable rates, prompting the central bank’s move.

“RBI rescheduling the auction shows that its is concerned about the sentiment in the market, this is a good move,” said Arun Kaul, executive director at Central Bank of India.

Late in the evening, RBI announced that it will raise Rs 12,000 crore through the sale of bonds next Friday, including a new seven-year benchmark security. However, the mood for debt is not very good with employers in the US cutting only 247,000 jobs in July — far less than market expectations — according to a government report.

This made traders conclude that the economy was turning around and it was a matter of time before the Fed increased rates. Besides, the rescheduling of an auction means that the borrowings calendar will be extended by another week.

Volumes were thin due to the bank union strike on Thursday and Friday. Only Rs 3,400 crore of bonds changed hands on Friday with the 10-year benchmark bond yield ending lower at 7.03%. Bank of England expanded its open market bond purchase programme on Friday besides keeping the key interest rate unchanged at 0.5%.

Even the currency market had only low volumes as per Clearing Corporation of India. The rupee fell 15 paisa to 47.90 against the dollar on Friday, with downswing in local shares despite the dollar struggling in global currency markets. However, by late evening, the dollar had recovered. The dollar index was up 0.5% by late evening.

History of Forex Market in India

Until 1993, India maintained an administrative exchange rate. From its independence from the British to 1971, India had a fixed exchange rate against the currency of its former rulers. This was however done in consultation with the International Monetary Fund. After the collapse of the fixed exchange rate system in 1971, the currency was linked to the British pound, but not for long. As other economies gained prominence in India’s economic relations, there was a need to maintain stability vis-à-vis with other currencies too. 1975 onwards, the Indian rupee was linked to a basket of currencies and was devalued from time to time in order to maintain stability. Following India’s economic liberalisation in 1991, the currency was devalued by 18% and administered exchange rate lived side by side the market too. Also, the Indian currency began being quoted against the U.S. dollar – a change from its pound based quote. It was only in 1993, that the rupee was made to float. The Indian currency was now tradable in the market.

The Foreign Exchange Market

India’s forex market is a multi-tiered market where the commercial banks that quote the domestic unit against the US dollar, are at the centre of activity. The rupee is not quoted against any other currency in this rate discovering market. Businesses that need to transact in foreign currency, do so with an authorised dealer (generally a commercial bank) as they are not permitted to deal directly with each other.

In general, the rupee’s exchange rate is characterised by stability against the dollar followed by a sharp depreciation ranging from 2% to 7%. However, if one takes into account inflation and the movement of other major currencies like the yen, mark and the pound, the domestic currency has been nearly stable in the past seven years. The central bank comes in from time to time in the market to buy or to sell dollars in order to stabilise the market, which it does successfully. The central bank is also sometimes nearly absent from the market, even during a movement.

Forex Market in India

India began its integration with the world economy with the beginning of the 1990s. Since then, the foreign trade has grown at an average rate of 8.1% every year. During this period, capital inflows grew even faster. And increasingly, Indian businesses have found greater foreign exchange in their cash flows.

Forex Market Daily Commentary

:: Australian Dollar: The Australian Dollar opens slightly lower today at 0.8390 after a fairly subdued session for the greenback ahead of tonight’s key US non-farm payroll data. During the offshore session the unit traded between 0.8375 and 0.8425. The Aussie hit an intraday high on Thursday of 0.8458 hot on the heels of better-than-expected local employment data. The economy added 32,200 positions in July for an unemployment rate of 5.8 per cent, unchanged from the previous month, adding further weight to suggestions the Reserve Bank of Australia (RBA) will need to raise rates sooner rather than later. The Aussie soon fell back down towards US84 cents as the market did not want to get too far ahead of itself in the lead-up to the RBA’s quarterly statement of monetary policy due for release today.

Foreign exchange market

The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies.[1]

The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars.

In a typical foreign exchange transaction a party purchases a quantity of one currency by paying a quantity of another currency.