Currency markets. International currency market

24.05.2022

Currency market is a sphere economic relations, manifested in the implementation of the transaction for the purchase and sale of foreign currency and securities in foreign currency, that is, the exchange of the currency of one country for the currency of another country at a certain nominal exchange rate, as well as operations for the investment of foreign exchange capital.

Nominal currency (exchange) rate is the relative price of the currencies of two countries, or the currency of one country expressed in the monetary units of another country. When the term "exchange rate" is used, it refers to the nominal exchange rate.

Establishing the rate of the national currency in foreign currency is currently called currency quote. The exchange rate of the national currency can be determined as in the form direct quotes when a foreign currency is taken as a unit, and in the form reverse quote when the national currency is taken as the unit.

The vast majority monetary assets, sold in the foreign exchange markets, has the form of a demand deposit in the largest banks that trade with each other. Only a small part of the market falls on the exchange of cash. It is in the interbank foreign exchange market that the main quotations are carried out. exchange rates.

When entering the foreign exchange market, economic entities pursue various goals:

continuous implementation of international settlements (enterprises - clients of banks)

diversification (change in the structure) of foreign exchange reserves and their replenishment (commercial, central banks)

profit in the form of a difference in exchange rates and interest rates on various debt obligations (commercial banks, enterprises)

· hedging (insurance) against currency and credit risks. When hedging, economic agents, wanting to reduce the risk associated with exchange rate fluctuations that can have a negative impact on their capital, seek to get rid of net liabilities in foreign currency, that is, to achieve a balance between assets and liabilities in this currency

Conducting monetary policy (Central banks, the Fed, Treasuries);

From an organizational and technical point of view, the foreign exchange market is a set of communication systems that interconnect banks of different countries that carry out international settlements and other foreign exchange transactions.

The participants of the foreign exchange market are:

· commercial banks, which not only diversify their portfolios with foreign assets, but also carry out foreign exchange transactions on behalf of firms entering foreign markets as exporters and importers. Currency transactions for the export and import of goods and services of each country form the basis for determining the value of the national currency

· Central banks

currency exchanges, brokerage agencies

interbank corporations

individual participants in the foreign exchange market.

Classification of currency markets. Foreign exchange markets can be classified according to a number of criteria: by scope, in relation to foreign exchange restrictions, by types of foreign exchange resources, by the degree of organization.

By dissemination- international and domestic currency markets, which, in turn, consist of a number of regional markets, formed by financial centers in certain regions of the world or a given country.

International currency market- this is a chain of world regional currency markets closely interconnected by a system of cable and satellite communications. Places of concentration of banks, specialized financial institutions, where international currency, credit, financial operations, transactions with securities and collateral have international financial centers.

Domestic foreign exchange market- this is the foreign exchange market of one state, i.e. market within a given country.

Towards currency restrictions one can distinguish between free and non-free foreign exchange markets. Currency restrictions are a system of state measures (administrative, legislative, economic, organizational) to establish the procedure for conducting operations with currency values. Currency restrictions include measures for targeted regulation of payments and transfers of national and foreign currency abroad.

By types of applied exchange rates the foreign exchange market can be single mode and dual mode.

A single mode market is a foreign exchange market with floating exchange rates, the quotation of which is set on exchange trading.

A dual regime currency market is a market where both a fixed and a floating exchange rate are applied at the same time. The introduction of a dual currency market is used by the state as a measure to regulate the movement of capital between the national and international loan capital markets. This measure is designed to limit and control the influence of the international loan capital market on the economy of a given state.

According to the degree of organization, the foreign exchange market is exchange and over-the-counter.

Exchange currency market- this is an organized market, which is represented by a currency exchange, it is the cheapest source of currency and foreign exchange funds; orders put up for exchange auctions have absolute liquidity.

Currency exchange- an enterprise that organizes trading in currency and securities in foreign currency. Its main function is not to obtain high profits, but to mobilize temporarily free Money through the sale of currency and securities in currency and in setting the exchange rate.

The over-the-counter currency market is organized by dealers, who may or may not be members of the currency exchange, and conduct it by telephone, telefax, computer networks.

Exchange and over-the-counter markets to a certain extent contradict each other and complement each other. This is due to the fact that, while performing the general function of trading in currency and circulation of securities in foreign currency, they use various methods and forms of selling currency and securities in foreign currency.

The advantages of the over-the-counter foreign exchange market are:

Sufficiently low cost of expenses for currency exchange operations. Bank dealers often use face-to-face currency auctions on the exchange to reduce their own costs for currency conversion by concluding agreements on the sale and purchase of currency at the exchange rate before trading on the exchange. On the exchange, commissions are charged from bidders, the amount of which is directly dependent on the amount of currency and ruble resources sold. In addition, the law establishes a tax on exchange transactions. In the over-the-counter market for an authorized bank, after the counterparty to the transaction has been found, the currency conversion operation is carried out practically free of charge

· higher speed of settlements than when trading on the currency exchange. This is primarily due to the fact that the over-the-counter foreign exchange market allows you to conduct transactions throughout the entire trading day, and not at a strictly defined time of the exchange session.

When classifying foreign exchange markets, the markets of eurocurrencies, eurobonds, eurodeposits, eurocredits, as well as "black" and "gray" markets are also distinguished.

Eurocurrency market- This is the international currency market of Western European countries, where transactions are carried out in the currencies of these countries. The functioning of the eurocurrency market is associated with the use of currencies in non-cash deposit and loan transactions outside the countries issuing these currencies.

Eurobond market expresses financial relations on debt obligations with long-term loans in eurocurrencies, issued in the form of bonds of borrowers. The bond contains data on the amount of debt, the terms and conditions of its repayment, the procedure for obtaining interest in accordance with coupons (a coupon is a part of a bond certificate, which, when separated from it, gives the owner the right to receive interest).

Eurodeposit market expresses stable financial relations on the formation of deposits in foreign currency in commercial banks of foreign countries at the expense of funds circulating on the Eurocurrency market.

Eurocredit market expresses stable credit relations and financial relations for the provision of international loans in Eurocurrency by commercial banks of foreign countries.

Spot market, or the market for the immediate supply of currency (within 2 business days).

Urgent (forward) currency market. If a participant in the foreign exchange market needs to buy foreign currency after a certain period of time, he can conclude a so-called forward contract for the purchase of this currency. Forward currency contracts include forward contracts, futures contracts and currency options.

Both a forward and a futures contract are an agreement between two parties to exchange a fixed amount of currency at a certain date in the future at a predetermined (urgent) exchange rate. Both contracts are binding. The difference between the two is that a forward contract is entered into off-exchange, while a futures contract is bought and sold only on a currency exchange, subject to certain rules, through an open bidding of the currency by voice.

currency option- This is a contract that provides the right (but not the obligation) to one of the participants in the transaction to buy or sell a certain amount of foreign currency at a fixed price for a certain period of time.

When concluding specific transactions for the purchase and sale of currencies, the following are used:

Spot rate- the price of a foreign currency unit of one country, expressed in currency units of another country, established at the time of the conclusion of a transaction involving immediate payment and delivery of currency (subject to the exchange of currencies by counterparty banks on the second business day from the date of the transaction).

Forward (term) rate- the price at which a given currency is sold or bought, provided that it is delivered on a certain date in the future. Forward (urgent) transactions with currency serve to insure participants against the risk of larger losses and extract speculative profits on the difference in rates (forward and spot) at the time of delivery of the currency.

All settlements on international transactions between direct participants in foreign exchange transactions are carried out through banks that consider foreign exchange transactions as one of the means of generating income. Therefore, when quoting, banks set two types of exchange rates: buyer's rate , at which the bank buys the currency, and seller rate, at which the bank sells the currency.

The difference between them, which is the bank's income, is called spread , or margin, which should cover the operating costs of the bank and provide it with a normal profit when conducting currency transactions.

Term exchange rate is made up of the spot rate at the time of the transaction and a premium or discount, that is, a premium or discount, depending on interest rates at the moment. The currency with the higher interest rate will be traded in the forward market at a discount to the currency with the lower interest rate. Conversely, a currency with a lower interest rate will sell in the forward market at a premium to a currency with a higher interest rate. In international practice, along with the difference in interest rates, interest on deposits in the interbank London market, that is, the LIBOR rate, is used. The difference between the forward exchange rate and the spot rate is calculated using the formula:

where is the spot rate (amount of national currency per unit of foreign currency)

Interest rates on deposits in national and foreign currencies

Forward term (in days).

The term currency market allows both to insure currency risks and to speculate in currency.

Swap operations make it possible to receive the necessary currency without currency risk, compensate for the temporary outflow of capital from the country, regulate the structure of foreign exchange reserves, including official ones.

In the practice of international settlements are very widely used cross rates , those. the ratio between two currencies, which are established from their rate in relation to the rate of a third currency.

The foreign exchange market, like any other market, requires certain regulation and control by the state. Currency regulation includes:

the procedure for conducting foreign exchange transactions

formation of the country's foreign exchange reserve and foreign exchange funds of economic entities,

currency and export controls.

The subjects of currency relations in the foreign exchange market are divided into residents and non-residents.

Foreign exchange transactions include transactions related to:

transfer of ownership of currency values

use of currency as a means of payment, as well as the ruble in the implementation foreign economic activity

import and transfer to the Republic of Belarus and export and transfer from it abroad of currency valuables

Implementation of international money transfers.

Foreign exchange operations are divided into

current operations

transactions related to the movement of capital.

The state develops and pursues a certain monetary policy. Monetary policy is the activity of the state for the purposeful use of foreign exchange. The content of monetary policy is multifaceted and includes the development of the main directions for the formation and use of foreign exchange funds, the development of measures aimed at the effective use of these funds.

The main executive body of currency regulation is the Central Bank of the Republic of Belarus (National Bank), and specific executors are authorized commercial banks, business entities and citizens.

National Bank of the Republic of Belarus:

manages foreign exchange transactions

Issues licenses to commercial banks to carry out operations in foreign currency on the territory of the Republic of Belarus and abroad and controls their execution

issues permits to authorized enterprises for the right to trade for currency

Issues permits to business entities to open current and deposit accounts abroad

introduces restrictions for commercial banks on the volume of loans from abroad, sets them maximum dimensions currency, interest rate and exchange rate risk

manages foreign exchange reserves on its balance sheet, determines the scope and procedure for the circulation of foreign currency on the territory of the Republic of Belarus

regulates the foreign exchange market of the Republic of Belarus and the ruble exchange rate against foreign currencies

establishes uniform forms of accounting, reporting, documentation and statistics of foreign exchange transactions

· prepares and publishes statistics of currency and financial operations of the Republic of Belarus in accordance with accepted international standards.

Option Futures Forward Swap Currency market Forex Spot capital market(Stock dealing) Money market Treasury bill, agency bill, municipal bill,
commercial, banking Certificate of deposit Savings certificate REPO agreement Mutual investment fund (PIF) Market of precious (banking) metals Real estate market(Realtor)

In the foreign exchange market, the interests of investors, sellers and buyers of currency values are coordinated. Western economists characterize the foreign exchange market from an organizational and technical point of view as an aggregate network of modern means of communication connecting national and foreign banks and brokerage firms.

Story

Prerequisites for the development and establishment of the modern foreign exchange market

Currency exchange operations existed in the ancient world and in the Middle Ages. However, modern currency markets emerged in the 19th century. The main prerequisites that contributed to the formation of the foreign exchange market in the modern sense were the following:

wide development of various international economic relations;
the creation of a world monetary system based on the organization and regulation of foreign exchange relations, fixed by interstate agreements;
wide distribution of credit funds for international settlements and payments;
consolidation and centralization banking capital, wide development of correspondent relations between banks of different countries, including the maintenance of correspondent accounts in foreign currency;
the development of information technologies and means of communication: telegraph, telephone, telex, which simplified contacts between foreign exchange markets and reduced the time to receive information about completed transactions.

Developing national currency markets and their interaction formed a single world currency market, in which the leading currencies began to circulate freely in the world's financial centers.

Types of foreign exchange transactions, their evolution

Historically, two main methods of payment were distinguished in international circulation: tracing and remittance, which were used in international circulation before the First World War and partially (to a lesser extent) between the First and Second World Wars.

The term "tracing" is associated with the use of a bill of exchange - drafts. When paying by this method, the creditor issues a bill of exchange for the debtor in his currency (for example, a creditor in London presents a debtor in Chicago with a demand for payment of a debt in dollars) and sells it on his foreign exchange market at the buyer's bank rate. Thus, when tracing, the creditor acts as an active party, he sells a bill in the currency of the debtor in his foreign exchange market.

When remitting, the debtor acts as an active person: he buys the currency of the creditor in his foreign exchange market at the rate of the seller.

In the first years after the Second World War until the end of the 1950s, when foreign exchange restrictions were in effect, industrial developed countries spot currency transactions (with immediate delivery of currency) and futures transactions "forward" prevailed.

Since the 1970s, futures and options currency transactions began to develop. This kind of transactions provided new opportunities for all participants in the foreign exchange market, both for currency speculators and for hedgers, that is, to protect against currency risks and receive speculative profits. Banks began to make foreign exchange transactions in combination with interest rate swaps.

The main characteristics of modern world currency markets

Modern world currency markets are characterized by the following main features.

The international nature of the currency markets based on the globalization of world economic relations, the widespread use of electronic means of communication for transactions and settlements.
The continuous, non-stop nature of transactions during the day alternately in all parts of the world.
Unified nature of foreign exchange transactions.
The use of operations in the foreign exchange market for the purpose of protection against foreign exchange and credit risks through hedging.
A huge share of speculative and arbitrage transactions, which are many times greater than foreign exchange transactions associated with commercial transactions. The number of currency speculators has increased dramatically and includes not only banks and financial and industrial groups, TNCs, but also many other participants, including individuals and legal entities.
Volatility of exchange rates, which does not always depend on fundamental economic factors.

The modern foreign exchange market performs the following functions:

Ensuring the timeliness of international payments.
Creation of opportunities for protection against currency and credit risks.
Ensuring the interconnection of world currency, credit and financial markets.
Creation of opportunities for diversification of foreign exchange reserves of the state, banks, enterprises.
Market regulation of exchange rates based on the interaction of demand and supply of currencies.
The possibility of implementing monetary policy as part of the state economic policy. The possibility of implementing coordinated actions of different states in order to achieve the goals of macroeconomic policy within the framework of interstate agreements.
Providing opportunities for foreign exchange market participants to receive speculative profits through arbitrage transactions.

In terms of the volume of operations, the foreign exchange market is significantly superior to other segments of the financial market. Thus, the daily volume of transactions in 1997 in the stock market was estimated at $100-150 billion, in the bond market - $500-700 billion, and in the foreign exchange market - $1.4 trillion (against $205 billion in 1986). Currently, the volume of foreign exchange transactions is about 4 trillion dollars a day.

Currency market instruments

In the modern foreign exchange market, the following types of transactions can be distinguished.

Currency transactions with immediate delivery ("spot")

With the help of the "spot" operation, banks meet the needs of their clients in foreign currency by transferring capital, including "hot" money, from one currency to another, and carry out arbitrage and speculative transactions.

Forward transactions with foreign currency

Forward currency transactions include forward, futures and option transactions, as well as currency swaps.

Forward transactions

Options

Currency swaps

Currency swap swap- exchange, exchange) is a transaction that combines the purchase and sale of two currencies on the terms of immediate delivery with a simultaneous counter-transaction for a certain period with the same currencies. Each party is both a seller and a buyer of a certain amount of currency. A currency swap is not a standard exchange contract.

For swap transactions, the cash transaction is carried out at the spot rate, which in the counter transaction (terms) is adjusted to take into account the premium or discount, depending on the dynamics of the exchange rate. At the same time, the client saves on margin - the difference between the rates of the seller and the buyer for a cash transaction. Swap operations are convenient for banks: they do not create an open position (the purchase is covered by the sale), they temporarily provide the necessary currency without the risk associated with a change in its exchange rate.

Foreign exchange market participants

The main participants in the foreign exchange market are:

Central banks. Their function is to manage the state's foreign exchange reserves and ensure the stability of the exchange rate. To implement these tasks, both direct foreign exchange interventions and indirect influence can be carried out - through the regulation of the level of the refinancing rate, reserve standards, etc.
Commercial banks. They carry out the bulk of foreign exchange transactions. Other market participants hold accounts in banks and carry out conversion and deposit-credit operations necessary for their purposes through them. Banks concentrate the total needs of the commodity and stock markets in currency exchange, as well as in attracting / placing funds. In addition to satisfying customer requests, banks can conduct operations on their own at the expense of own funds. Ultimately, the international currency exchange market (forex) is a market for interbank transactions. The largest influence is exerted by large international banks, whose daily volume of transactions reaches billions of dollars. The volume of one interbank contract with real delivery of currency on the second business day (spot market) is usually about 5 million US dollars or their equivalent. The cost of one conversion payment is from 60 to 300 dollars. In addition, you have to bear the costs of up to 6 thousand dollars per month for the interbank information and trading terminal. Because of these conditions, Forex does not carry out conversions of small amounts. To do this, it is cheaper to turn to financial intermediaries (a bank or a currency broker) who will convert for a certain percentage of the transaction amount. With a large number of clients and multidirectional orders, a situation of internal clearing regularly arises, when the intermediary does not need to contact a third-party counterparty (there is no need to carry out a real conversion through Forex). But intermediaries always receive their commissions from customers. Due to the fact that not all client orders get to Forex, intermediaries can offer clients commissions that are significantly lower than the cost of direct Forex operations. At the same time, if intermediaries are eliminated, the conversion cost for the end client will inevitably increase.
Firms engaged in foreign trade operations. Total applications from importers form a stable demand for foreign currency, and from exporters - its supply, including in the form of foreign currency deposits (temporarily free balances in foreign currency accounts). As a rule, firms do not have direct access to the foreign exchange market and conduct conversion and deposit operations through commercial banks.
International investment companies, pension and hedge funds, insurance companies. Their main task is diversified asset portfolio management, which is achieved by placing funds in securities of governments and corporations of various countries. In dealer slang, they are simply called funds. funds). To this species can also be attributed to large transnational corporations that carry out foreign production investments: the creation of branches, joint ventures, etc.
Currency exchanges. In a number of countries there are national currency exchanges, whose functions include the exchange of currencies for legal entities and the formation of a market exchange rate. The state usually actively regulates the level of the exchange rate, taking advantage of the compactness of the local exchange market.
Currency brokers. Their function is to bring together the buyer and seller of foreign currency and to carry out a conversion or loan and deposit operation between them. For their mediation, brokerage firms charge a brokerage commission as a percentage of the transaction amount. But the amount of this commission is often less than the difference between the bank's loan interest and the bank deposit rate. Banks can also perform this function. In this case, they do not issue a loan and do not bear the corresponding risks.
Private individuals. Citizens carry out a wide range of operations, each of which is small, but in total they can form a significant additional supply or demand: payment for foreign tourism; Money transfers wages, pensions, fees; purchase/sale of cash currency as a store of value; speculative foreign exchange transactions.

Notes

Literature

D. Yu. Piskulov " Theory and practice of currency dealing».

Functional, institutional and organizational and technical features of the currency markets

From the point of view of functionality, currency markets today provide for the implementation of various international settlements, as well as insurance against risks associated with currency, diversification of foreign exchange reserves, profits for participants due to exchange rate differences, and foreign exchange intervention. From an institutional position, they are a combination of investment companies, authorized banks, brokerage houses, various exchanges, as well as foreign banks that carry out foreign exchange transactions. From an organizational and technical point of view, the foreign exchange market is a set of communication systems connecting banks of various countries with each other, which carry out international settlements and other foreign exchange transactions.

Participants of the foreign exchange market on the stock exchange and outside it

The subjects participating on the exchange are entrepreneurs, brokers, dealers and players. There are also entities that are outside the currency exchange. These are such participants in the foreign exchange market as:

brokerage house;
authorized bank of the Russian Federation;
citizen;
business entity;
investment company;
foreign bank.

Exchange rate

The national currency in the foreign exchange market is exchanged for the money of other states. The exchange rate is a proportion, a quantitative ratio in which the currency of a certain state is exchanged for the monetary unit of a country. In other words, this is the price of a unit of foreign currency, expressed in a certain number of national currency units. It is this rate that determines the situation in the foreign exchange market. When the price of a unit of foreign currency increases in terms of domestic currency, there is a depreciation of the domestic one, and vice versa.

Types of exchange rates

The following types are distinguished:

fixed - the officially established ratio between the currencies of certain states, based on mutual parity;
fluctuating - the exchange rate, changing freely under the influence of supply and demand;
floating - a kind of fluctuating, involving the use of a currency regulation mechanism.

In 1976, at the Jamaica Conference, it was decided to introduce a floating exchange rate system. The state, as a rule, imposes a certain restriction on the export, import and transfer of foreign and national currency abroad and from abroad. The ratio of supply and demand determines all the prices of a market economy, as well as the prices of the currency (that is, exchange rates).

What determines supply and demand in the currency market?

The following factors determine the size of supply and demand in the foreign exchange market:

on the volume of trade between states (for example, the demand for a brand is the greater, the greater the country's trade exchange with Germany);
on the state of the state economy and the scale of inflation;
on the purchasing power of national currencies.

The latter is determined by the number of identical services and goods that can be purchased for a certain amount of different national currencies (in other words, the consumer basket). For example, for 100 rubles, francs, dollars, etc.

Consumer basket

However, the ratio of currencies in different countries in terms of purchasing power for various goods is not the same. In world practice, therefore, today the exchange rate can be determined on the basis of purchasing power parity. It acts as a result of comparing the volume of goods that can be bought in the markets of different countries in the national currency. In this case, the same set of goods is selected in the basket and the amount required to purchase this set in different countries is determined.

Only when using a variety of different services and goods that are included in the consumer basket of the two states, it is possible to achieve an objective comparison. For example, if a basket costs 815 rubles in Russia and 100 dollars in the United States, then the exchange rate (the price of one dollar) will be 8 rubles. 15 kopecks, 19 cents will be the price of one ruble. Therefore, if prices double in our country, and in the United States they remain unchanged, then the dollar to ruble exchange rate, if other conditions of exchange remain the same, will increase by 2 times. But in reality, the exchange rate can deviate significantly under the influence of many reasons. For example, the exchange rate may rise under the influence of the demand for the currency.

However, the greatest difficulty lies in the fact that there is no single way to determine the composition of the consumer basket. The structure of consumption of goods and services included in it in different countries is very different. However, there is no other way to determine the exchange rate.

Classifications of foreign exchange markets

It is possible to classify foreign exchange markets according to many criteria: in relation to various currency restrictions, according to the scope of distribution, according to the degree of organization and types of foreign exchange resources.

According to the breadth of coverage, that is, according to the scope of distribution, domestic and international currency markets are distinguished. Both of them, in turn, consist of regional ones formed by financial centers in the regions of a given country or the world (for example, the Moscow currency market).

International and domestic currency markets

International unites the currency markets of all countries of the world. It means a chain of world regional markets connected by a system of satellite and cable communications. There is an overflow of funds between them under the influence of current information, as well as forecasts about the possible position of certain currencies, which are made by leading market participants.

Domestic foreign exchange market - the market of one state, that is, functioning within a particular country. It consists of regional domestic markets, which include currency markets, the centers of which are located in interbank exchanges.

Free and non-free markets

It is also possible to single out unfree and free currency markets in relation to certain currency restrictions.

The latter are a system of state measures (administrative, organizational, economic, legislative) to establish the procedure for carrying out transactions with various currency values. They include measures aimed at targeted regulation of payments, as well as transfers abroad of foreign and national currencies. Currency financial market, on which there are currency restrictions, is not free, and in case of their absence - free.

Single and Dual Mode Markets

The market, according to the types of exchange rates that are used on it, can be with a double or with a single regime. With one regime - when there are free exchange rates, that is, exchange rates are floating, their quote is set on the exchanges during trading. For example, the official exchange rate of the ruble is set by fixing.

Fixing

Fixing in Russia is carried out by the Central Bank of the Russian Federation on the Moscow Exchange. It is a definition of the US dollar exchange rate against the ruble. The fixing rate is thus the unified exchange rate of the Central Bank in the Russian currency market. Using information from the Reuters agency about cross-rates, he deduces the ruble exchange rate against other currencies through it. Currency fixing takes place twice a week. The Central Bank of the Russian Federation on its day reports the exchange rates of the main freely convertible currencies against the ruble by publishing in the media.

Dual Mode

A dual regime market is one that uses both a floating and a fixed exchange rate. An example of it is the foreign exchange market of the Russian Federation. The introduction of such a regime is used by countries as a measure aimed at regulating the movement of capital in the international and national loan capital markets. Such a measure is designed to control and limit the impact on the economy of this country of the international loan capital market. In our country, for example, "Vnesheconombank" in relation to blocked accounts for foreign investment (if the calculations are not fully completed) applies the ruble exchange rate, which is a commercial one, established by the Central Bank of the Russian Federation.

OTC and exchange markets

According to the degree of organization, there is an over-the-counter and exchange currency market (Moscow Exchange, for example). Exchange - an organized market, represented by a currency exchange, that is, an enterprise that organizes trading in currency and securities in it. The exchange is not a commercial enterprise. Its main function is not to make a profit, but to mobilize funds that are temporarily free, through the sale of currency, as well as securities in it, and in setting the exchange rate, that is, its market value. In our country, for example, the largest is the currency market of the Moscow Exchange. It was created in 2011 through the merger of MICEX and RTS.

The stock exchange market has a number of advantages. It is the cheapest source of foreign exchange funds and currency; tendered bids have absolute liquidity. What is the liquidity of securities and currencies? It means their ability to quickly turn into a national currency without loss in price.

The foreign exchange OTC market is organized by various dealers. They may or may not be members of the currency exchange and conduct their activities via computer networks, telefax, and telephone.

The over-the-counter and exchange currency markets, which develop in parallel, contradict each other to some extent. At the same time, they are complementary. This is due to the fact that, performing their activities the general function of the circulation of securities and currency trading, they use various forms and methods of selling currency and securities in it.

The advantages of the foreign exchange over-the-counter market are as follows. Firstly, in a rather low cost of costs associated with currency exchange operations. Often, bank dealers use face-to-face currency auctions to reduce their costs for currency conversion by concluding agreements on the sale and purchase of currency at the rate set before the start of trading. Commissions are withdrawn from participants in trading on the stock exchange, and their amount directly depends on the amount of ruble and foreign exchange resources that have been sold. The law also establishes a special tax on transactions on the stock exchange. The operation of currency conversion in the over-the-counter market is carried out for an authorized bank after finding a counterparty for the transaction practically free of charge.

Secondly, here the calculation speed is higher than when trading on the stock exchange. This is mainly due to the fact that the over-the-counter currency market allows transactions to be made during the trading day at any time, and not only at a specific time of the exchange session. Therefore, the over-the-counter foreign exchange market is very important. Its development is necessary for each state for faster and less costly currency exchange.

The over-the-counter market significantly exceeds the exchange market in terms of trading volume. The most liquid in the world today is the over-the-counter Forex market. It operates around the clock in all world financial centers (from Tokyo to New York).

Other types of currency markets

When classifying foreign exchange markets, the markets for Eurobonds, Eurocurrencies, Eurocredits, Eurodeposits, "gray" and "black" markets should also be singled out.

The eurocurrency market is an international market for Western European currencies, where transactions take place in the currencies of these states. Its functioning is due to the fact that currencies are used in deposit and loan non-cash transactions outside the issuing states. In the Eurobond market, there are financial relations in Eurocurrencies for debt obligations in the case of long-term loans issued as bonds of borrowers.

On the Eurodeposit market, financial relations are carried out on deposits of commercial banks of various states in foreign currency at the expense of funds that circulate on the Eurocurrency market. Accordingly, stable financial relations and credit relations are taking place in the Eurocredit market for the provision of various international loans by commercial banks of states in foreign currency.

Central Bank interventions

Interventions in the foreign exchange market are carried out by the Central Bank of certain countries to manipulate the exchange rate of these states. Sometimes they are organized by several Central Banks. For example, interventions by the Bank of Japan, the Fed and the ECB led to the fact that in 2011 the price of the yen fell by 2%. This was done in order to support Japan after a serious earthquake occurred here. The depreciation of the yen against the dollar contributed to the maintenance of the economy of this country.

In addition to changing the quotes of certain currencies, interventions are also used to control the volatility of the currency market, manage liquidity, increase the reserves of the Central Bank (in different currencies), stimulate the outflow and inflow of capital. Interventions are often carried out in the short term. They are fictitious and real. With real interventions, the Central Bank really does throw in or buy up foreign currency. With fictitious ones, he only declares his intention to carry out certain monetary transactions. Fictitious interventions are also aimed at changing currency quotes, although they have very short-term consequences.

Now you know what the foreign exchange market and the exchange rate are. These themes are very important in the international economy, especially today when exchange rates fluctuate rapidly.

International currency market Main types of currency transactions International credit market Eurocurrency and credit market

International currency market. Main types of foreign exchange transactions

The purchase and sale of foreign currency is carried out in the foreign exchange markets, which are official centers where such transactions are made at a certain rate. In a broader sense, under foreign exchange market understand the scope of economic relations arising from transactions for the purchase and sale of foreign currency. Operations related to the movement of capital are also carried out in the foreign exchange markets (purchase and sale of securities in foreign currency, foreign exchange investment.

Currency markets developed in the 19th century. Depending on the volume of currency trading, the number of currencies traded among the currency markets, one can single out national (local), regional and world markets. The growth in the volume of operations in national markets and the deepening of the relationship between them led to the formation of a single world currency market.

After the 1980s, there was a rapid growth in transactions in the world foreign exchange market. In 1989, the daily volume of currency transactions in the world reached 590 billion dollars, in 1995 - 1190 billion, in 2001 - 1200 billion. In the first decade of the 20th century. high growth rates of the volume of transactions in the world currency market have been preserved. In 2004, the volume of daily transactions amounted to 1934 billion dollars, in 2010 - 3971 billion, and in 2013 - 5345 billion dollars.

Of course, the scale of operations carried out with the currency far exceeds the needs of commercial transactions. Foreign exchange markets are increasingly being used to manage foreign exchange and credit risks, and speculative and arbitrage transactions also play an important role.

The rapid growth of foreign exchange markets is in no small part due to the collapse of the Bretton Woods monetary system. The Jamaican system, which allows free choice of the exchange rate regime, while giving central banks more room to maneuver, has led to more day-to-day exchange rate volatility. One of the consequences of this was the increase in the scale of currency speculation. Currency speculation is believed to provide liquidity, but it has a destabilizing effect on the market. That is why central bank interventions are so important.

These interventions do not always bring the desired result. Periodically, pressure is experienced by almost all currencies in which transactions are made. However, the role of central banks as stabilizers of the foreign exchange market remains very significant. In the mid-1990s, the efforts of central banks and financial authorities made it possible to generally stabilize the situation in the world currency markets. However, in the first decade of the XXI century. the instability of exchange rates, in particular the US dollar against the euro, showed that central banks are not able to withstand the action of spontaneous market forces.

On the other hand, depreciation of the national currency against foreign currencies in some cases turns out to be beneficial, since it allows stimulating national exports. And this circumstance should also be taken into account when analyzing the monetary policy of a country.

The world currency market has its own internal hierarchy. The two centers (London and New York) are far ahead of other currency markets. At the same time, the volume of daily foreign exchange transactions in the UK (over $2,720 billion in 2013) is twice the volume of trade in the US.

Major currency markets in Europe are Frankfurt am Main, Zurich, Paris, Brussels, in Asia - Tokyo, Singapore and Hong Kong. In recent years, the volume of foreign exchange transactions in the Netherlands, France and Australia has increased significantly.

Although there are a huge number of participants in foreign exchange trading, the dominant position in 2013 was occupied by four banks: Deutsche Bank (Frankfurt am Main), Citigroup (New York), Barclays (UK), U-B -ES" (Zurich, Switzerland), which concentrated in their hands more than 50% of transactions for the purchase and sale of currency.

The global foreign exchange market, which operates around the clock, is decentralized. The bulk of foreign exchange transactions take place between big banks using the latest electronic equipment. It was its implementation that made it possible to reduce the time of execution of transactions, but did not completely remove the currency risk, given the many hours difference between remote parts of the market (the time difference between Tokyo and London is 9 hours, between London and New York - 5 hours, between New York and Tokyo - 10 a.m.). Operations in the world currency market are unified.

In some countries (including Russia), currency exchanges play a certain role. However, as the national currency market develops, this role is gradually decreasing.

The Russian foreign exchange market by the end of the first decade of the XXI century. although the daily volume of trade on it increased significantly (up to 70 billion in 2012), remained local (local). The main segments were exchange, over-the-counter (interbank) and futures markets. The share of the exchange segment, which had been of greater importance in the past, by 2013 significantly decreased.

The global financial and economic crisis led to a decrease in the average daily turnover of the Russian foreign exchange market. In 2008 they amounted to 82.3 billion dollars, in 2009 they fell to 51.2 billion and in 2012 they have not yet reached the pre-crisis maximum.

As the Russian economy emerges from the crisis, the volume of foreign exchange transactions in the domestic foreign exchange market will increase.

In the foreign exchange markets, currency operations, which are transactions regarding the purchase and sale of currency, as a result of which there is a change in the owner of the national and foreign currencies (or two foreign currencies). Foreign exchange transactions also include the provision of loans and settlements in foreign currency. The main types of currency transactions are transactions with immediate delivery of currency (on the second business day), as well as futures transactions (with delivery of currency on time, later than two business days) - forwards, options, futures, swaps. The volume of futures transactions is growing at a faster pace.

A foreign exchange transaction involves at least two parties, one of which is usually a bank. Therefore, the bank offers the client or buyer such a sale or purchase rate that allows the bank not only to cover the costs associated with the purchase and sale of currency, but also to receive a certain income.

The rate at which a bank purchases foreign currency from a client is called buyer's rate, the rate at which the bank sells the currency, - seller's rate. Although at first glance it seems natural that the buyer's rate is lower than the seller's rate (and in most cases this is true), however, this situation is typical for direct quotes, those. for a situation where 1 unit of foreign currency is expressed in a certain amount of national currency (for example, 1 US dollar = 32 rubles 20 kopecks). At indirect quotation(when 1 unit of the national currency is expressed in a certain number of units of foreign currency) the buyer's rate is higher than the seller's rate. Indirect quotation is used mainly in the UK in some other countries. Both quotes are basically equivalent.

Example 1 . An English bank quotes an American bank as follows:

£1 = $1.6006 - $1.6012 In this example, an indirect quote is used; the seller's rate is 1.6006, the buyer's rate is 1.6012.

You can translate this indirect quote into a direct one by dividing 1 by 1.6006 - 1.6012. Multiplying the direct and indirect quotes gives one.

$1 = £0.62476 - £0.62453 A lower value means a buyer's rate, and a higher value means a seller's rate. In this case, the English bank would buy dollars at £0.6245 for $1 and sell at £0.6248 for $1.

However, in the world currency markets (for example, in London), transactions are made in significant volumes in which the national currency does not participate. In this case, the concept of "direct" and "indirect quotation" is not applicable. In practice, the rule is to consider the currency on the left side of the currency pair as 1 unit. Thus, the exchange rate of the EiR-iBO currency pair (EUR/USD) of 1.3524 means that 1 euro is exchanged for 1.3524 US dollars.

When making foreign exchange transactions, banks need to monitor currency position, which refers to the ratio of claims and liabilities for each foreign currency. If they are equal, the position is considered closed, otherwise - open (long, when the requirements for the currency exceed the obligations; short, when the requirements for the currency are less than the obligations). An open position always means exposure to currency risk, i.e. the possibility of sharp, unexpected and unfavorable changes in the exchange rate, which can cause significant losses (or profit if the exchange rate changes in a favorable direction).

Deals with immediate delivery of currency - delivery of currency within a period not exceeding two business days after the conclusion of the transaction. Varieties of such transactions are transactions TOD, TOM, SPOT (delivery of currency on the day of conclusion of the transaction, delivery on the next day after the conclusion of the transaction, delivery on the second business day).

Urgent deals are agreements on the future supply of currency at the exchange rate fixed at the time of the conclusion of the transaction (in some cases, the principle of determining the rate of execution of the transaction is established). At the same time, a currency contract can be categorical (firm), i.e. binding on both parties. In other cases, he gives the bank's client the right to choose whether or not to carry out the transaction concluded earlier. Currency transactions can be concluded with a specific client or traded centrally on the exchange. Therefore, futures transactions are divided into forwards (categorical for both parties), options (the option buyer has the right to decide whether to make a deal or not) and futures (traded only centrally on the exchange.

In the 80s of the XX century. swap transactions appeared and quickly became widespread. Swaps are a one-document agreement whereby both parties make periodic payments to each other. Currency swaps, which are a variation of these transactions, become possible if one of the parties has a comparative advantage in the market of one of the currencies. Example 2 shows one of the options for currency swaps.

Example 2. Interest rate on short-term foreign currency loans,%.

Firm	Country L	Country B

If firm 1 needs the currency of country B and firm 2 needs the currency of country A, then the swap becomes possible. Firm 1 takes a loan in the currency of its country (A) and credits it to the account of firm 2, and firm 2 takes a loan in the currency of its country (B) and credits it to the account of firm 1. In this case, firm 1 makes payments at the rate of 11% , and firm 2 - 9%.

Firm 1 has a benefit (12 - 11 = 1%), and firm 2 also has a benefit (10 - 9 = 1%), i.e. the exchange of obligations proved beneficial to both parties. However, it is not at all necessary that the distribution of benefits be the same. It all depends on the terms of the specific swap agreement.

A currency swap can also be carried out as a combination of two conversion transactions on the terms of immediate delivery and delivery of currency in the future.

In the 1990s, the structure of transactions in the world foreign exchange market underwent significant changes. The share of transactions with the immediate supply of currency decreased, while the share of futures trading increased sharply. This reflects, in particular, the fact that currency speculation and the desire to reduce currency risk are increasingly becoming the main driving factors in the development of the foreign exchange market.

2 International currency market and major world currencies

If we formulate as precise a definition as possible, then the international currency market FOREX (Foreign Exchange Market) is a set of operations for the purchase and sale of foreign currency, and the provision of loans on specific conditions (amount, exchange rate, interest rate) with execution on a certain date. The main participants in the foreign exchange market are: commercial banks, currency exchanges, central banks, firms engaged in foreign trade operations, investment funds, brokerage companies; direct participation in foreign exchange transactions of individuals is constantly growing.

FOREX is the largest market in the world, it accounts for up to 90% of the entire world capital market in terms of volume. Thousands of participants in this market - banks, brokerage firms, investment funds, financial and Insurance companies- within 24 hours a day they buy and sell currency, concluding transactions within a few seconds anywhere in the world. United into a single global network by satellite communication channels using the most advanced computer systems, they create a turnover of foreign exchange funds, which in total exceeds 10 times the total annual gross, national product of all countries of the world per year (moreover, the figure is taken from a 5-year-old textbook) .

Why is it necessary to move such huge masses of money through electronic channels? Currency transactions provide economic ties between participants in various markets located on different sides of state borders: interstate settlements, settlements between firms from different countries for goods and services supplied, foreign investment, international tourism and business travel. Without foreign exchange transactions, these essential types of economic activity could not exist. But the money that serves here as an instrument becomes a commodity itself, as the supply and demand for transactions with each currency in various business centers changes over time, and therefore the price of each currency changes, and changes quickly and in an unpredictable way.

The international monetary device today is based on the regime of floating exchange rates: the price of the currency is determined primarily by the market. Therefore, the exchange rate either rises (the currency rises in price), then falls down. This means that you can buy a currency cheaper and after a while sell it more expensive, while making a profit. The international monetary system has come a long way over the millennia of human history, but undoubtedly today the most interesting and previously unthinkable changes are taking place in it. Two major changes define the new face of the global monetary system:

a) money is now completely separated from any material carrier;

b) powerful information and telecommunication technologies made it possible to combine monetary systems different countries into a single global financial system that does not recognize borders.

Previously, everything was quite simple and clear: "People are dying for the metal." And now money is not only not metal, but not even those green pieces of paper that warm the eyes. Real money that drives the destinies of people, pushes countries and peoples together, destroys empires and creates new ones, today this money is just numbers on computer screens. Whether this is good or not is not the subject of fundamental analysis, but the financial market of the planet is such today and we must learn to work on it.

The international currency market as we know it emerged after 1973, but its modern history began in the summer of 1944 in the American resort town of Bretton Woods. The outcome of the Second World War was no longer in doubt, and the allies took up the post-war financial structure of the planet. While the economies of all leading states after the war were to be in ruins or in the grip of military production, the US economy emerged from the war on the rise. And since the winners, the victims, and the vanquished needed food, fuel, raw materials and equipment, and only the American economy could provide all this in sufficient quantities, the question arose of how other countries would pay for this. After the war, they had little of what could be of interest to the United States; The United States already had the largest gold reserves, and many countries hardly had it at all. In any attempt to establish trade through currency exchange, the price of the dollar, due to the high demand for American goods, was bound to rise to such a level that all other currencies would depreciate and the purchase of American goods became impossible.

On the other hand, this could be considered a problem for anyone but the United States, but a sufficient number of people understood that this approach led to the Second World War. After the First World War, America washed its hands, leaving international responsibility to other countries. The world experienced a strong dollar hunger, the gold reserves of countries flowed into the United States, and other currencies depreciated. Natural but short-sighted protectionist decisions isolated the economies from each other, and economic nationalism easily turned into diplomatic relations and escalated into war.

To prevent the post-war collapse of currencies, the financial forum at Bretton Woods created a number of financial institutions, including the International Monetary Fund. originally represented by the combined currency resources, where all countries (but to the maximum extent the United States) contributed their share, and from where each country could take to maintain its currency. The US dollar had a fixed gold content ($35 per troy ounce), while other currencies were pegged to the dollar at a certain ratio (fixed exchange rates).

But the post-war demand for the dollar was above all expectations. Many countries sold their currencies to buy dollars to buy American goods. American exports far exceeded imports (the trade surplus was growing), and the world's dollar deficit was growing. IMF resources were not enough to borrow countries to support their currencies. The answer to these problems was the American Marshall Plan, according to which the European countries provided the United States with a list of material resources necessary for the recovery of their economies, and the United States transferred to them (not on loan) the amount of dollars sufficient to purchase the specified. These dollars prevented the devaluation of other currencies, contributed to a new growth of American exports, opening up new markets for it.

The American presence in all parts of the world through the cost of maintaining military bases, American private investment in the business of Europe (acquisition of European firms or participation in them), the activity of American tourists spending money around the world, gradually filled foreign banks with dollars in quantities greater than necessary. At the end of the 1950s, European business no longer needed the same amount of American goods, had more attractive investment opportunities than dollar deposits, and therefore did not want to hold excess dollars. At first, the US Treasury was ready to buy dollars, paying them with the established gold content, preventing the dollar from falling against other currencies. But the flow of gold from the United States led to a halving of the gold reserves in the early 60s. Foreign central banks also supported the dollar against national currencies for a long time, buying up surplus dollars offered by the population, private banks and businesses.

The system of fixed exchange rates lasted until the early 1970s. By this time, the US no longer had a favorable trade balance; other countries were selling more and more to America and buying less from it. Dollars that were disposed of abroad ended up in foreign central banks as a hopeless unclaimed cargo. For several years, the United States resisted the inevitable devaluation of the dollar and did not agree to the establishment of free floating exchange rates, but after a series of problems in the early 70s, they abandoned the gold content of the dollar, the rate of which has since been determined by market demand and supply (free floating - freely floating rate). By 1980, the price of gold rose to almost $750 per troy ounce (since the beginning of 1975, Americans have been legally able to purchase gold as an investment). In the late 70s, the dollar fell to its post-war low, and its subsequent history is a series of ups and downs.

All major world currencies are now in such a free-floating mode, when their price is determined by the market, depending on how much this currency is needed for the purchase of goods, investments and interstate settlements. Of course, this swimming is not completely free; each country has a central bank whose main task, in accordance with the law, is to ensure the stability of the national currency. The FOREX international currency market unites all the many participants in currency exchange operations: individuals, firms, investment institutions, banks and central banks.

The main currencies that account for the bulk of all transactions in the FOREX market today are the US dollar (USD), euro (EUR), Japanese yen (JPY), Swiss franc (CHF) and British pound sterling (GBP). Prior to the advent of the euro currency, the German mark (DEM) had a large market share.

The US dollar (USD), as we have seen, became the world's leading currency after World War II. Today, the dollar is a universal means of payment in international business, a safe-haven currency in various financial and political crises in other countries, as well as an object of international investment, thanks to a large volume of highly reliable securities - long-term US government bonds. Confidence in the stability of the American economic and financial system, that all proceeds from government debt securities will be paid on time, not requisitioned, and not subject to unexpected taxes, attracts both private foreign investors and foreign governments to this market.

In recent years, the US stock market has shown unprecedented growth, attracting huge capital from foreign and domestic investors, which serves as an additional source of strength for the dollar. Since the mid-1980s, American stocks have become a better investment option than gold: stocks have risen, while the price of gold has fallen. In the period after 1993, American stocks have been growing so rapidly that not only independent experts, but also officials have repeatedly expressed fears that stock prices are too high and their fall could be too sharp and lead to a financial and economic crisis.

The dollar holds, according to various estimates, a share of 50 to 61 percent in the international reserves of central banks, amounting to up to $1 trillion. It is the generally accepted base currency when quoting other currencies. The dollar participates as one of the parties in 87% of all transactions in the FOREX market (as of October 1998). Of all Japanese yen exchanges, the US dollar accounted for 87%; for the German mark, this figure was 64%, and for the Canadian dollar - 98%.

To illustrate the recent history of the dollar, we present in Figure 2.1. dollar index chart. Due to the special position that the dollar occupies in the world market, it is customary to express the prices of all other currencies in relation to the dollar. The price of the yen is expressed as the number of yen that is given for one dollar; The price of a pound is expressed in terms of the number of dollars that one pound gives. But for the dollar, this means that it has as many prices as there are currencies, and when one of its prices rises, another can fall. To obtain an objective characterization of the price of the dollar, one can use the average exchange rate of the dollar against the main world currencies, taking into account the volume of international trade (the meaning of this index will be discussed in more detail in paragraph 3), which shows that the dollar is currently confidently justifying the statements of the American financial authorities that a strong dollar continues to be the backbone of US policy.

Figure 2.2 shows a graph of the main US stock index, the Dow Jones index, which shows the dynamics of the growth in stock prices of leading American industrial corporations. We will return to this chart later when we analyze the situation on the foreign exchange market in the summer of 1999.

Rice. 2.1 US dollar index chart

Rice. 2.2 Chart of the US stock index Dow Jones

Rice. 2.3 Japanese yen exchange rate chart

The Japanese yen (JPY) went through a difficult path from the post-war level of 360 yen to the dollar, determined by the American occupation administration, to the rate of about 80 yen to the dollar in 1995, after which its level dropped again significantly and again strengthened in the second half of 1998 .

The main feature of the financial situation in Japan today is extremely low short-term interest rates; practically they are today supported by the Bank of Japan at zero level. Therefore, very large amounts of savings and funds pension funds and other investors were invested in foreign securities, primarily in US government bonds and European assets. Significantly yielding to the dollar as a reserve currency and an instrument of international settlements, the yen is nevertheless one of the main currencies in the international financial market.

British pound (GBP). The British pound was the world's leading currency until the First World War; having significantly weakened its positions in the interwar period, it finally lost its leadership to the dollar after the Second World War, which was caused by natural problems in the economy affected by the war, as well as undermining confidence in the currency due to massive counterfeiting sabotage against it by Germany during the war.

Rice. 2.4 British pound chart

Up to 50% of transactions involving the pound take place in the London market. In the global market, it occupies about 14%. Almost all of this volume accounted for the dollar and the German mark. New York banks practically stop quoting the GBP at noon. The pound is very sensitive to data on the labor market and inflation in England, as well as to oil prices (in textbooks on the foreign exchange market, it was even characterized as petrocurrency). In the comments of events on the FOREX market, the pound is referred to either as a cable or a pound. The first name has remained since the time when the most operational data received in Europe from America were telegrams transmitted over the transatlantic submarine cable. Cable is used, as a rule, in the GBP quote to USD, and the pound was used in pound quotes to the German mark.

Swiss franc (CIS). The volume of transactions with the participation of the Swiss franc is significantly less than with other currencies considered. In relation to the German mark, he often played the role of a safe-haven currency (for example, in the event of crises in Russia). In previous years, the franc fluctuated more than the German mark; but lately this has not been the case. The function of the franc as a safe-haven currency was greatly reduced in 1999 due to the military conflict in the Balkans.

Rice. 2.5 Chart of the Swiss franc

With the advent of the euro, the volatility (volatility) of the franc against the euro became much less than the volatility of the franc against the German mark. The Swiss National Bank (SNB) is pursuing a policy aimed at coordinating financial conditions in Switzerland and the Euro-region; specifically, on the day the European Central Bank cut interest rates this spring, the SNB announced a cut in its interest rate 20 minutes later.

While the majority of exchanges involve the dollar, some non-dollar markets are also very active. About 98% of the total volume of the non-dollar market used to fall on the German mark. After the introduction of the euro, volumes in many markets declined and have not yet fully recovered.

The Deutsche Mark (DEM) was second only to the dollar in terms of its share in the world's foreign exchange reserves (about 25%). With regard to the stability of the exchange rate, the mark was strongly influenced by socio-political factors in Russia, with which Germany is most closely connected by economic and political relations, and this influence was transferred to the new euro currency, since Germany represents a significant part of the economy of eleven states that have united their currency systems.

The new currency euro (EUR), which appeared on January 1, 1999, united 11 European nations into the most powerful economic bloc in the world, which accounts for almost a fifth of the global output of goods and services and world trade. The Euro-region (“Euro-area”) includes Austria, Belgium, Germany, Ireland, Spain, Italy, Luxembourg, the Netherlands, Portugal, Finland and France, covering an area of 2,365,000 sq. km. with a population of 291 million people (for comparison - in the US 269 million, in Japan - 126).

Rice. 2.6 Chart of the common European currency euro (before January 1, 1999, the ECU chart is shown)

The total gross domestic product (GDP) in 1997 was 5.55 trillion ECU (ECU-European Currency Unit), or 6.51 trillion US dollars, while the US GDP was 6.85 trillion ECU, and Japan - 3 .71 trillion. Exports account for 10% of the euro-region's GDP. In 1997, total exports were 25% higher than those of the United States and twice those of Japan. Germany accounts for up to 30% of the European economy; Together, Germany, France and Italy make up about 70% of the economy of the euro-region.

The average consumer price inflation in October 1998 was 1.0%; the main interest rates were reduced by 11 European central banks to 3.0% in autumn 1998. The average unemployment rate was 10.8% by the beginning of 1999, varying from 18.2% in Spain to 2.2% in Luxembourg.

The Danish krone and the Greek drachma, which are the closest candidates for joining the euro, are regulated from 01.01.99 by the ERM-2 mechanism. This means that the central exchange rates of these currencies to the euro are determined: 7.46038 Danish crowns / euro and 353.109 Greek drachma / euro, and the boundaries of the allowable range of exchange rate changes for the crown form a corridor with a width of 2.25% of the central rate, and for the drachma the width of the corridor is 15 %. In the event that the currency leaves the currency band, the relevant national Central Bank must undertake foreign exchange intervention to adjust the exchange rate. For example, the kroon intervention range is: buy 7.29252, sell 7.62824. The European Central Bank has an obligation to help the central banks of Denmark and Greece maintain rates within given ranges in the event of speculative attacks against currencies.

The creation of a single European currency is by far the greatest financial experiment in human history. None of the previous attempts to create any significant financial union was successful. The euro is now also viewed by many as an experiment, the outcome of which will not necessarily be a success. Throughout the first half of 1999, the exchange rate was steadily declining, which some see as signs of distrust in the new currency, while others see the monetary policy effectively pursued by a single European Central Bank, since a low exchange rate plays into the hands of European exporters, significantly increasing the competitiveness of their goods on world markets. markets.

The path of European states to the unification of monetary systems was long and not easy, not all countries could withstand the conditions formulated for unification, the composition of the participants changed. But for several years, a synthetic ecu currency (ECU) made up of European currencies existed and was recognized in the world (its exchange rate on December 31, 1998 became the euro exchange rate); the persistent work of the leaders of a number of European states, primarily Germany, France, Italy, eventually led to the launch of a new currency.

For a better understanding of the processes taking place in the euro-region, it is useful to remember those macroeconomic guidelines (embedded in the Maastricht Treaty, which determined the conditions for convergence), with which the European states approached the unification of their monetary systems.

1. Price stability: the average inflation rate for the previous year should not exceed by more than 1.5% the inflation rates of the three of the merging countries with the lowest inflation rates.

2. Sustainability financial position state, meaning the absence of significant budget deficit, in particular, a) the ratio of the planned or actual state deficit to the value of the gross domestic product (GDP) will not exceed 3%, or this ratio should consistently decrease, approaching the specified level, significant deviations are only short-term; b) attitude public debt to GDP should not exceed 60%. or it should consistently decrease, tending to the specified level.

3. Criterion of convergence of interest rates, meaning. that during the previous year, the average long-term interest rates (long-term rates) should not exceed by more than 2% the interest rates of the three states with the greatest price stability. Interest rates are measured on the basis of long-term government bonds or similar foam papers, subject to differences in national definitions.

4. The condition of participation in the European Exchange Mechanism (ERM) for two years before the transition to the EURO currency, in particular, during this period there should be no devaluation of the cross-rate of the currency against the currencies of other member states.

The table below (Table 2.1) contains data on the status of the participating countries as of July 1998, when the final decision on the membership of the monetary union was made.

Table 2.1

The following table (Table 2.2) presents the values of the cross-rates of eleven currencies against the euro as of December 31, 1998.

Table 2.2

We will also give the standard country codes used in information systems to designate various indicators.

Table 2.3

(Materials are given on the basis of: Likhovidov V.N. Fundamental analysis of world currency markets: methods of forecasting and decision making. - Vladivostok - 1999)

International Monetary Systems and Exchange Rate Regimes
Monometallism / Bimetallism
Fixed / floating rate
International currency systems
International financial organizations