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Customer market
It comprises of transactions between banks
(authorized dealers) and their customers. Such
transactions are of two types, viz., Ready
delivery & Forward delivery.
Interbank Market
It comprises of:
Transactions between different banks in the
same center/country.
Transactions between banks in a country and
their correspondents and overseas branches.
Transactions of the central bank of one country
with central banks of other countries.
Features of FEM
It is market where foreign currencies are
brought and sold.
Eg: If an Indian importer import goods from
USA and has to make payment in US dollar ,it
will approach FEM to buy US dollar for rupees.
An exporter converts the export proceeds
obtained in foreign currency into its own
currency.
Types of Quotations:
1. Direct Quotation:- It is the home currency
price of one unit of foreign currency.
Eg., Rs.44 = $1
2. Indirect Quotation:- It is the foreign currency
price of one unit of home currency. E.g.- Re.1 =
$1/44 = $.0227
Direct quote = 1/ Indirect quote, and vice versa.
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