Foreign Exchange Literacy Program

Sponsor: International Treasury

What is Foreign Exchange

The buying or selling of one currency against another currency Also Foreign Exchange is also called FX or Forex

Foreign Exchange Market

Biggest global market Trading is almost 24/7 Daily trading volume is about 1.3 Trillion Dollars Most liquid market in the world

Foreign Exchange Market Players

Central Banks Banks Corporations Importers and Exporters Private Investors Tourists

Major Currency Pairs

British Pound (GBP/USD) Euro (EUR/USD) Australian Dollar (AUD/USD) New Zealand Dollar (NZD/USD) Canadian Dollar (USD/CAD) Swiss Franc (USD/CHF) Japanese Yen (USD/JPY)

Asian Currencies
Singapore Dollar (USD/SGD) Hong Kong Dollar (USD/HKD) Taiwan Dollar (USD/TWD) Philippine Peso (USD/PHP) Chinese Yuan (USD/CNY) South Korean Won (USD/KRW)

Currency Notation
Ex: AUD/USD 1.0750 In this example the AUD is the COMMODITY currency and the USD is the TERM currency The Commodity Currency is the currency that is being bought or sold in TERMs of the Term Currency In the example, 1 AUD is equal to 1.0750 USD If we have 1000 AUD how much USD will we have? Answer 1,075.00 USD (1000 AUD x 1.0750 USD)

Currency Notation
Ex: GBP/USD 1.6500 In this example the GBP is the COMMODITY currency and the USD is the TERM currency The Commodity Currency is the currency that is being bought or sold in TERMs of the Term Currency In the example, 1 GBP is equal to 1.6500 USD If we have 1000 GBP how much USD will we have? Answer 1,6500.00 USD (1000 GBP x 1.6500 USD)

Currency Notation
Ex: USD/CAD 0.9800 In this example the USD is the COMMODITY currency and the CAD is the TERM currency The Commodity Currency is the currency that is being bought or sold in TERMs of the Term Currency In the example, 1 USD is equal to 0.9800 CAD If we have 1000 CAD how much USD will we have? Answer 1020.00 USD (1000 CAD / 0.9800 USD)

The Concept of the Bid and Offer

The Market always gives two way quotes. This is called the Bid and the Offer Example: USD/PHP Please? Market Quotes: 43.10 / 43.12 43.10 is the BID 43.12 is the OFFER

Defining the BID Price

The BID price is where the market is willing to BUY the Commodity Currency and SELL the TERM Currency. THE BID price is also where a client can SELL the Commodity Currency since the Market is willing to BUY at this price. Market Quotes: USD/PHP 43.10 / 43.12 The BID is 43.10 this means the Market is willing to buy your USD @ 43.10 So, if you have USD 10,000 and you want to sell it for USD, the Market will BUY your USD @ 43.10 and you will get Php 431,000.00 in return.

Defining the OFFER

The OFFER price is where the market is willing to SELL the Commodity Currency and BUY the TERM Currency. THE OFFER price is also where a client can BUY the Commodity Currency since the Market is willing to SELL at this price. Market Quotes: USD/PHP 43.10 / 43.12 The BID is 43.12 this means the Market is willing to SELL you USD @ 43.12 So, if you want to BUY USD 10,000, you can buy it @ 43.12. This means you will have to pay the MARKET PHP 431,200.00 in and get USD 10,000.

Defining the OFFER

The OFFER price is where the market is willing to SELL the Commodity Currency and BUY the TERM Currency. THE OFFER price is also where a client can BUY the Commodity Currency since the Market is willing to SELL at this price. Market Quotes: USD/PHP 43.10 / 43.12 The BID is 43.12 this means the Market is willing to SELL you USD @ 43.12 So, if you want to BUY USD 10,000, you can buy it @ 43.12. This means you will have to pay the MARKET PHP 431,200.00 in and get USD 10,000.

Example 1
USD/CAD = 0.9768 / 0.9773 A client wishes to buy 100,000 Canadian dollars and pay in USD. Which side should we use? How much should the client pay in USD? Answer We are going to sell Canadian dollars, So We need to look on the bid side 0.9768 100,000*0.9768 = USD 97,680 The client should pay 97,680 USD

Example 2
USD/SGD 1.2374-1.2378 A client wishes to sell 100,000 Singapore dollars and We will pay in USD Which side should we use? How much should the client receive in USD? Answer We are going to buy Singapore dollars, So We need to look on the offer side 1.2378 100,000/1.2378= USD 80,788.50 The client should receive 80,788.50 USD

Example 3
GBP/USD = 1.6273 / 1.6276 A client wishes to buy 100,000 sterling and pay in USD. Which side should we use? How much should the client pay in USD? Answer We are going to sell sterling, So We need to look on the offer side 1.6276 100,000*1.6276 = USD 162,760 The client should pay 162,760 USD

Example 4
AUD/USD = 1.0565 / 1.0570 A client wishes to sell 100,000 Australian dollars and We will pay in USD Which side should we use? How much should the client receive in USD? Answer We are going to buy Australian Dollars, So We need to look on the bid side 1.0565 100,000*1.0565 = 105,650 USD The client should receive 105,650 USD

Example 5
USD/PHP = 43.33 / 43.38 A client wishes to sell 100,000 USD and and will pay in PHP Which side should we use? How much should the client receive in php? Answer We are going to buy USD, So We need to look on the bid side 43.33 100,000*43.33 = 4,333,000 PHP The client should receive 4,333,000 PHP

Example 6
EUR/USD = 1.4357 / 1.4360 A client wishes to buy 100,000 Euro and pay in USD Which side should we use? How much should the client pay in USD? Answer We are going to sell EURO, So We need to look on the offer side 1.4360 100,000*1.4360 = 143,600 USD The client should pay 143,600 USD

Example 7
USD/HKD = 7.7780 / 7.7787 A client wishes to buy 100,000 Hong Kong dollars and pay in USD Which side should we use? How much should the client pay in USD? Answer We are going to sell Hong Kong dollars, So We need to look on the bid side 7.7780 100,000/7.7780 = 12,856.78 USD The client should pay 12,856.78 USD

Example 8
NZD/USD = 0.8126 / 0.8131 A client wishes to sell 100,000 New Zealand dollars and We will pay in USD Which side should we use? How much should the client receive in USD? Answer We are going to buy NZD, So We need to look on the bid side 0.8126 100,000*0.8126 = 81,260 USD The client should receive 81,260 USD

Example 9
USD/TWD = 28.715 / 28.718 A client wishes to buy 100,000 Taiwan dollars and pay in USD Which side should we use? How much should the client pay in USD? Answer We are going to sell, So We need to look on the bid side 28.715 100,000/28.715 = 3,482.50 USD The client should pay 3,482.50 USD

Example 10
USD/JPY = 80.179 / 80.181 A client wishes to sell 100,000 Japanese Yen and We will pay in USD Which side should we use? How much should the client receive in USD? Answer We are going to buy, So We need to look on the offer side 80.181 100,000*80.181 = 1,247.18 USD The client should receive 1,247.18 USD

Example 11
GBP/USD 1.6332 / 1.6335 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 GBP and will pay in Peso PHP (GBP/PHP) Which side should we use? How much should the client pay in PHP? Answer We are going to sell GBP against the USD and also sell the USD against PHP so we need to look both on the offer side of GBP/USD and USD/PHP to get the rate 1.6335 and 43.34 1.6335*43.34= 70.79 GBP/PHP 100,000*70.79= 7,079,000 PHP The client should pay 7,079,000 PHP

Example 12
EUR/USD 1.4355 / 1.4360 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 EUR and will receive payment in Peso PHP (EUR/PHP) Which side should we use? How much should the client receive in PHP? Answer We are going to buy EUR against the USD and buy the USD against PHP so we need to look both on the BID side of EUR/USD and USD/PHP to get the rate 1.4355 and 43.32 1.4355*43.32= 62.19 EUR/PHP 100,000*62,19= 6,219,000 PHP The client should receive 6,219,000 PHP

Example 13
AUD/USD 1.0578 / 1.0583 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 AUD and will pay in Peso PHP (AUD/PHP) Which side should we use? How much should the client pay in PHP? Answer We are going to sell AUD against USD and Sell USD against PHP so we need to look both on the offer side of AUD/USD and USD/PHP to get the rate 1.0583 and 43.34 1.0583*43.34= 45.87 AUD/PHP 100,000*45.87= 4,587,000 PHP The client should pay 4,587,000 PHP

Example 14
NZD/USD 0.8183 / 0.8187 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 NZD and will receive payment in Peso PHP (NZD/PHP) Which side should we use? How much should the client receive in PHP? Answer We are going to buy NZD against USD and buy USD against PHP so we need to look both on the bid side of NZD/USD and USD/PHP to get the rate 0.8183 and 43.32 0.8183*43.32= 35.45 NZD/PHP 100,000*35.45= 3,545,000 PHP The client should receive 3,545,000 PHP

Example 15
USD/CAD 0.9793 / 0.9796 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 CAD and will pay in Peso PHP (CAD/PHP) Which side should we use? How much should the client pay in PHP? Answer We are going to sell CAD against USD and sell the USD against PHP so we need to look on the bid side of USD/CAD and offer side USD/PHP to get the rate 0.9793 and 43.34 43.34/0.9793= 44.26 CAD/PHP 100,000*44.26= 4,426,000 PHP The client should pay 4,426,000 PHP

Example 16
USD/SGD 1.2305 / 1.2310 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 SGD and will receive payment in Peso PHP (SGD/PHP) Which side should we use? How much should the client receive in PHP? Answer We are going to buy SGD against USD and buy USD against PHP so we need to look on the offer side of USD/SGD and bid side USD/PHP to get the rate 1.2310 and 43.32 43.32/1.2310 = 35.19 SGD/PHP 100,000*35.19= 3,519,000 PHP The client should receive 3,519,000 PHP

Example 17
USD/HKD 7.7840 / 7.7845 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 HKD and will pay in Peso PHP (HKD/PHP) Which side should we use? How much should the client pay in PHP? Answer We are going to sell HKD against USD and sell USD against PHP so we need to look on the bid side of USD/HKD and offer side USD/PHP to get the rate 7.7840 and 43.34 43.34/7.7840 = 5.58 HKD/PHP 100,000*5.58= 558,000 PHP The client should pay 558,000 PHP

Example 18
USD/TWD 28.790/ 28.795 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 TWD and will pay in Peso PHP (TWD/PHP) Which side should we use? How much should the client pay in PHP? Answer We are going to sell TWD against USD and sell USD against PHP so we need to look on the bid side of USD/TWD and offer side USD/PHP to get the rate 28.790 and 43.34 43.34/28.790 = 1.5054 TWD/PHP 100,000*1.5054= 150,540 PHP The client should pay 150,540 PHP

Example 19
USD/MYR 3.3033 / 3.3036 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 MYR and will in Peso PHP (MYR/PHP) Which side should we use? How much should the client receive in PHP? Answer We are going to buy MYR against USD and buy USD against PHP so we need to look on the offer side of USD/MYR and bid side USD/PHP to get the rate 3.3036 and 43.32 43.32/3.3036 = 13.11 MYR/PHP 100,000*13.11= 1,313,000 PHP The client should receive 1,313,000 PHP

Example 20
USD/JPY 80.31/ 80.33 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 JPY and will pay in Peso PHP (JPY/PHP) Which side should we use? How much should the client pay in PHP? Answer We are going to sell JPY against USD and sell USD against PHP so we need to look on the bid side of USD/JPY and offer side USD/PHP to get the rate 80.31 and 43.34 43.34/80.31= 0.5397 JPY/PHP 100,000*0.5397= 53,970 PHP The client should receive 541,000 PHP

Example 21
GBP/USD 1.6332 / 1.6335 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 GBP and will pay in Peso PHP (GBP/PHP) with .30 spread Which side should we use? How much should the client pay in PHP? Answer We are going to sell GBP against the USD and also sell the USD against PHP so we need to look both on the offer side of GBP/USD and USD/PHP to get the rate plus 0.30 cents to get the rate 1.6335 and 43.64 1.6335*43.64= 71.29 GBP/PHP 100,000*71.29= 7,129,000 PHP The client should pay 7,079,000 PHP

Example 22
EUR/USD 1.4355 / 1.4360 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 EUR and will receive payment in Peso PHP (EUR/PHP) with 0.30 spread Which side should we use? How much should the client receive in PHP? Answer We are going to buy EUR against the USD and buy the USD against PHP so we need to look both on the BID side of EUR/USD and USD/PHP to get the rate less 0.30 cents to get the rate 1.4355 and 43.02 1.4355*43.32= 61.76 EUR/PHP 100,000*61.76= 6,176,000 PHP The client should receive 6,176,000 PHP

Example 23
AUD/USD 1.0578 / 1.0583 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 AUD and will pay in Peso PHP (AUD/PHP) with .30 spread Which side should we use? How much should the client pay in PHP? Answer We are going to sell AUD against USD and Sell USD against PHP so we need to look both on the offer side of AUD/USD and USD/PHP to get the rate plus 30 cents to get the rate 1.0583 and 43.64 1.0583*43.64= 46.18 AUD/PHP 100,000*45.87= 4,618,000 PHP The client should pay 4,618,000 PHP

Example 24
NZD/USD 0.8183 / 0.8187 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 NZD and will receive payment in Peso PHP (NZD/PHP) with 0.30 spread Which side should we use? How much should the client receive in PHP? Answer We are going to buy NZD against USD and buy USD against PHP so we need to look both on the bid side of NZD/USD and USD/PHP to get the rate less 30 cents to get the rate 0.8183 and 43.02 0.8183*43.02= 35.20 NZD/PHP 100,000*35.20= 3,520,000 PHP The client should receive 3,520,000 PHP

Example 25
USD/CAD 0.9793 / 0.9796 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 CAD and will pay in Peso PHP (CAD/PHP) with 0.30 spread Which side should we use? How much should the client pay in PHP? Answer We are going to sell CAD against USD and sell the USD against PHP so we need to look on the bid side of USD/CAD and offer side USD/PHP to get the rate plus 30 cents to get the rate 0.9793 and 43.64 43.34/0.9793= 44.56 CAD/PHP 100,000*44.56= 4,456,000 PHP The client should pay 4,456,000 PHP

Example 26
USD/SGD 1.2305 / 1.2310 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 SGD and will receive payment in Peso PHP (SGD/PHP) with 0.30 spread Which side should we use? How much should the client receive in PHP? Answer We are going to buy SGD against USD and buy USD against PHP so we need to look on the offer side of USD/SGD and bid side USD/PHP to get the rate less 30 cents to get the rate 1.2310 and 43.02 43.02/1.2310 = 34.95 SGD/PHP 100,000*35.19= 3,495,000 PHP The client should receive 3,495,000 PHP

Example 27
USD/HKD 7.7840 / 7.7845 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 HKD and will pay in Peso PHP (HKD/PHP) with 0.30 spread Which side should we use? How much should the client pay in PHP? Answer We are going to sell HKD against USD and sell USD against PHP so we need to look on the bid side of USD/HKD and offer side USD/PHP plus 30 cents to get the rate 7.7840 and 43.64 43.64/7.7840 = 5.61 HKD/PHP 100,000*5.61= 561,000 PHP The client should pay 561,000 PHP

Example 28
USD/TWD 28.790/ 28.795 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 TWD and will pay in Peso PHP (TWD/PHP) with 0.30 spread Which side should we use? How much should the client pay in PHP? Answer We are going to sell TWD against USD and sell USD against PHP so we need to look on the bid side of USD/TWD and offer side USD/PHP plus 30 cents to get the rate 28.790 and 43.64 43.64/28.790 = 1.5158 TWD/PHP 100,000*1.5158= 151,580 PHP The client should pay 151,580 PHP

Example 29
USD/MYR 3.3033 / 3.3036 USD/PHP 43.32 / 43.34 A client wishes to sell 100,000 MYR and will in Peso PHP (MYR/PHP) Which side should we use? How much should the client receive in PHP? Answer We are going to buy MYR against USD and buy USD against PHP so we need to look on the offer side of USD/MYR and bid side USD/PHP less 30 cents to get the rate 3.3036 and 43.02 43.02/3.3036 = 13.02 MYR/PHP 100,000*13.02= 13,020,000 PHP The client should receive 13,020,000 PHP

Example 30
USD/JPY 80.31/ 80.33 USD/PHP 43.32 / 43.34 A client wishes to buy 100,000 JPY and will pay in Peso PHP (JPY/PHP) with 0.30 spread Which side should we use? How much should the client pay in PHP? Answer We are going to sell JPY against USD and sell USD against PHP so we need to look on the bid side of USD/JPY and offer side USD/PHP to get the rate plus 30 cents to get the rate 80.31 and 43.64 43.64/80.31= 0.5434 JPY/PHP 100,000*0.5434= 54,340 PHP The client should pay 54,340 PHP