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Sumeet N.

Chaudhari (FT-26) Foreign Exchange Market in India

MARKET VOLUME The annual turnover of the market is more than $400 billion. This transaction does not include the inter-bank transactions. According to the record of transactions released by RBI, the average monthly turnover in the merchant segment was $40.5 billion in 2003-04 and the inter-bank transaction was $134.2 The average total monthly turnover was about $174.7 billion for the same period. HISTORY The history of forex market in India owes its origin to an important decision taken by the Reserve Bank of India (RBI) in the year 1978 which allows banks to undertake intra-day trading in foreign currency exchange. As a result of this step, the agreement of maintaining square or near square position was to be complied with only at the close of business every day. The history of currency trading in India also clearly shows that during the initial period when these economic reforms started, the exchange rate of national currency i.e. Indian rupee used to be determined by the RBI in terms of a weighted basket of currencies of Indias major trading partners. Moreover, there were some fairly significant restrictions on the current account transactions

FEATURES The foreign exchange market or the forex market is characterized by:

Huge trading volumes 24 hour tradingGeographical Diversity Liquidity Large variety and number of traders

PARTICIPANTS IN FOREIGN EXCHANGE MARKET Customers:-The customers who are engaged in foreign trade participate in foreign exchange market by availing of the services of banks.

Commercial Banks:-They are most active players in the foreign exchange market. Commercial bank dealing with international transaction offer services for conversion of one currency in to another. They have wide network of branches. Central Banks:-In all countries Central bank have been charged with the responsibility of maintaining the external value of the domestic currency. Generally this is achieved by the intervention of the bank. Exchange Brokers:-foreign exchange brokers play very important role in the foreign exchange market. However the extent to which services of foreign brokers are utilized depends on the tradition and practice prevailing at a particular foreign exchange market center. Overseas FOREX Market:-Today the daily global turnover is estimated to be more than US $ 1.5 trillion a day. The international trade however constitutes hardly 5 to 7 % of this total turnover. The rest of trading in world foreign exchange market is constituted of financial transaction and speculation. Speculators:-The speculators are the major players in the foreign exchange market.

Main player and currency

Currency Rates Per 1.00 US Dollar Country Currency ISO 08/31/11 09/01/11 % Change ARGENTINA Peso ARS 4.314339 4.307797 -0.1516% AUSTRALIA Dollar AUD 0.935112 0.932393 -0.2908% AUSTRIA BELGIUM BRAZIL CANADA CHILE CHINA CZECH REP. DENMARK EUROPEAN UNION FINLAND FRANCE Euro Euro Real Dollar Peso Yuan Koruna Krone Euro Euro Euro EUR 0.692736 0.700146 +1.0697% EUR 0.692736 0.700146 +1.0697% BRL 1.590509 1.602267 +0.7393% CAD 0.978342 0.976733 -0.1645% 462.8474 459.5361 -0.7154% CNY 6.380090 6.381514 +0.0223% CZK 16.69409 16.91309 +1.3118% DKK 5.137642 5.192598 +1.0697% CLP EUR 0.692736 0.700146 +1.0697% EUR 0.692736 0.700146 +1.0697% EUR 0.692736 0.700146 +1.0697%