Unit 14: The foreign exchange market

Group 8
Phạm Ngọc Ánh
Trịnh Thanh Hoa
Thái Thị Hoàng Yến
Phạm Thanh Hoa
Lê Đức Dũng



Vocabulary

Exchange (v)

/iks'tʃeinʤ/

To give in return for something receive

Exchange (n)

/iks'tʃeinʤ/

The act, process. Or an instance of exchanging.

the rate at which the currency unit of one country may be exchange for that of another – Tỷ giá

Exchange rate (n)

hối đoái

Float (v)

/fləut/

To find a level in relationship to other currencies solely in response to the law of supply an
demand – Thả nổi

Intervene (v)

/,intə'vi:n/

to take action to affect the market forces of an economy, esp to maintain the stability of a
currency – Can thiệp

Convert (v)

/kən'və:t/:

to exchange ( a security or bond ) for something of – Đổi

Convertibility (n)

/kən,və:tə'biliti/

the quality of being exchangeable (especially the ability to convert a currency into gold or other
currencies without restriction ) – sự chuyển đổi, khả năng chuyển đổi

Equivalent (adj)

/i'kwivələnt/


- equal or interchangeable in value, quantity, significance, etc- Tương đương


Vocabulary

Acquisition (n)

/,ækwi'ziʃn/

The act of acquiring / something acquired - sự giành được, sự thu được

Transaction (n)

/træn'zækʃn/

the act of transacting or the fact of being transacted : Giao dịch

Benefit (n)

/'benifit/

something that is advantageous of good – Lợi ích

Trade (v)

/treid/

to exchange (one thing) for another – Trao đổi


Trade (n)

/treid/

the buying and selling of goods – Sự trao đổi, thương mại

Participate (v)

/pɑ:'tisipeit/

to be one of a group of people actively doing st : Tham gia

Participant (n)

/pɑ:'tisipənt/

a person who participates ( in a particular activity) – người, đối tượng tham gia

Quote (v)

/kwəut/

to state the current or market price of ( a stock, bond, etc) - Ấn định, xác định


Vocabulary exercises
I. Match up the half- sentences below

1.


To ‘peg’ a currency against
something means to

2. A clean floating exchange rate
3. Exchange controls used to limit
4. Speculators buy or sell currencies in
order to
5. ‘Market forces’ means
6. ‘Hedging’ means
1.B

2.D

3.A 4.C

5.F 6.E

A . The amount of country’s money that
resident were able to change into foreign
currencies.
B. Fix its value in inlation to it.
C. Make a profit by making capital gains or
by investing at higher interest rates
D. Is determinded by supply and demand.
E. Trying to insure against unfavorable price
movements by way of futures contracts.
F. The determination of price by supply and
demand (the quantity available and the
quantity bought and sold)



Vocabulary exercises
II. Which six of these verbs are defined below ?
Abolish

adjust

appreciate

convert

diverge

1. Fluctuate
To make changes
peg to something
suspend
revalue
To change something into something else

2.
3.
4.
5.
6.

To end something permanently
To end something temporarily
To go up or down (in quantity, value, etc.)
To move away from what is conidered normal


establish


I. Reading
The foreign exchange market is the market in which such national currencies as dollars, pesos deutschemarks, yen,
francs, and others are exchanged. It is not an organized market with fixed hours and a physical meeting place, such as the New
York Stock Exchange or Chicago Board of Trade. The foreign exchange market is an over – the – counter market, the primary
communication instruments being the telephone and the computer. The market has developed rapidly in the past quarter
century, and the volume of activity has escalated dramatically in response to the growth in the volume of world trade in goods
and services, and especially in response to the expansion of international capital flows – the acquisition of financial and real
assets across national borded. Total worldwide foreign exchange market transactions in 1996 were approximately $1.2 trillion, or
$1,200 billion per day. More than 90 percent of these transactions are associated with capital flows. Among the most important
financial centers are New York, London, Tokyo, Paris, Frankfurt, Hong Kong, and Zurich. Among them, London is the world’s
largest foreign exchange center. Banks here trade almost $200 billion each day in foreign currencies.


Comprehension questions

1.

What is foreign exchange market?
The foreign exchange market is the market in which such national currencies are exchanged

•. 2. Why is foreign exchange market to be an OTC market?
Because it is not an organized market with fixed hours and physical
meeting place.


TRANSLATION


The foreign exchange market is the market in which such national
currencies as dollars, pesos deutschemarks, yen, francs, and others are
exchanged. It is not an organized market with fixed hours and a physical
meeting place, such as the New York Stock Exchange or Chicago Board of
Trade. The foreign exchange market is an over – the – counter market, the
primary communication instruments being the telephone and the computer.
The market has developed response to the growth in the volume of world
trade in goods and services, and especially in response to the expansion of
international capital flows – the acquisition of financial and real assets
across national borders

Thị trường ngoại hối là nơi mỗi đơn vị tiền tệ của các quốc gia như
đồng Đô-la, Pê-sô, đồng Mác, Yên, Phơ-răng và những đồng tiền khác
được giao dịch. Đây không phải là một thị trường được tổ chức với thời
gian hoạt động và địa điểm giao dịch cố định, ví dụ như Sở giao dịch
chứng khoán New York hay Sàn giao dịch Chicago mà là thị trường
không có địa điểm giao dịch, cách thức giao dịch chủ yếu là thông qua
điện thoại và máy tính. Thị trường ngoại hối đã nổi lên nhanh chóng từ
năm 1970, mức độ hoạt động tăng lên một cách chóng mặt nhờ vào sự
phát triển không ngừng của thương mại quốc tế, và đặc biệt là sự mở
rộng quy mô của dòng vốn đầu tư quốc tế thông qua quá trình thực
hiện giao dịch các tài sản tài chính và tài sản thực ở nước ngoài.


TRANSLATION

Total worldwide foreign exchange market transactions in
1996 were approximately $1.2 trillion, or $1,200 billion
per day. More than 90 percent of these transactions are

associated with capital flows. Among the most important
financial centers are New York, London, Tokyo, Paris,
Frankfurt, Hong Kong, and Zurich. Among them, London
is the world’s largest foreign exchange center. Banks here
trade almost $200 billion each day in foreign currencies

Tổng giao dịch của thị trường ngoại hối năm 1996 là xấp
xỉ 1,2 nghìn tỷ Đô-la mỗi ngày. Hơn 90% những giao dịch
dịch này liên quan đến các dòng vốn. New York, London,
Tokyo, Paris, Frankfurt, Hong Kong và Zurich là những
trung tâm tài chính lớn và London là sàn giao dịch ngoại
hối lớn nhất. Các ngân hàng đã thực hiện gần 200 tỷ Đôla giao dịch hối đoái mỗi ngày.


London’s trading position arises parlty from the large volume of
international financial business generated here – insurance, Eurobonds, shipping,
commodities and banking. London also benefits from its geographical location
which enables it to trade not only with Europe through – out the day but also with
the US and the Far East, whereas time difference makes it difficult for those two
centers to trade with each other. When banks in London begin trading at 8 a.m.
They can deal with banks in Tokyo, Hong Kong, Singapore whose trading day is
just ending. From 1 p.m, London banks can trade with banks in New York.: before
they close at 5 p.m, their counterparts may be in Los Angeles or San Francisco. The
foreign exchange market thus trades 24 hours a day. The foreign exchange
market enables banks and international corporations to trade foreign currencies in
large amounts. Capital flows arising from trade in goods and service, international
investment and loans together create this demand for foreign currency.


COMPREHENSION QUESTIONS


•

3. Why

is London the world’s largest foreign exchange

market?
Because its geographical location enables it to trade with other center based in
time differences such as Europe, US, Far East,…


Translation
London’s trading position aries parlty from the large volume of
international financial business generated here – insurance, Eurobonds,
shipping, commodities and banking. London also benefits from its
geographical location which enables it to trade not only with Europe

Thị trường London được như vậy một phần nhờ một lượng lớn

through – out the day but also with the US and the Far East, whereas time

giao dịch tài chính quốc tế được thực hiện ở đây – bảo hiểm, trái phiếu

difference makes it difficult for those two centers to trade with each other.

đồng Euro, vận chuyển, hàng hóa và giao dịch ngân hàng. Vị trí địa lý

When banks in London begin trading at 8 a.m. They can deal with banks


thuận lợi cũng mang lại lợi thế cho London khi mà nó cho phép giao dịch

in Tokyo, Hong Kong, Singapore whose trading day is just ending. From

với khối kinh tế châu Âu mà còn cả Mỹ và khối thị trường Viễn Đông

1 p.m, London banks can trade with banks in New York.: before they

trong khi mà sự khác biệt về múi giờ gây trở ngại đối với giao dịch 2

close at 5 p.m, their counterparts may be in Los Angeles or San Francisco.

trung tâm này. Khi các ngân hàng ở London mở cửa vào 8 giờ sáng, họ có
thể thực hiện giao dịch với các ngân hàng tại Tokyo, Hong Kong,
Singapore – những nơi mà ngày giao dịch chuẩn bị kết thúc. Từ 1 giờ
chiều, các ngân hàng tại London có thể thực hiện giao dịch với bên New
York trước khi họ đóng cửa lúc 5 giờ chiều, quầy giao dịch tương ứng có
thể ở Los Angeles hoặc San Francisco 


Translation
The foreign exchange market thus trades 24 hours
a day. The foreign exchange market enables banks and
international corporations to trade foreign currencies in
large amounts. Capital flows arising from trade in goods
and service, international investment and loans together
create this demand for foreign currency.

•
•


Như vậy, thị trường hối đoái hoạt động
24/24.
Thị trường hối đoái cho phép các ngân hàng và tổ chức
quốc tế giao dịch tiền tệ với số lượng lớn. Nguồn vốn từ
các hoạt động thương mại như: mua bán hàng hóa & dịch
vụ, đầu tư quốc tế và cho vay cùng nhau tạo ra cầu tiền tệ.


Reading
Foreign exchange trading is divided into spot and forward business. Generally speaking, spot
transactions are undertaken for an actual exchange of currencies (delivery or settlement) two business days
later (the value date).
Forward transactions involve a delivery date further into the future, possibly as far as a year or more
ahead. By buying or selling in the forward market a bank can, on its own behalf or that of a customer, protect
the value of anticipated flows of foreign currency from exchange rate volatility.


Comprehension Questions:
4.What are two types of transactions in the foreign exchange market?

•
•

. - Spot transaction
- Forward transaction

5. What are the differences between spot transaction and forward transactions?

•

•

Spot transactions are undertaken for an actual exchanged of currencies.
Forward transaction involves a delivery date further into the future. By buying or selling
currencies in the forward market to protect the value of currencies from exchange rate
volatility


Translation
Foreign exchange trading is divided into spot and forward
business. Generally speaking, spot transactions are undertaken

•

Giao dịch ngoại hối chia ra thành giao dịch hối đoái giao

for an actual exchange of currencies (delivery or settlement) two

ngay và giao dịch hối đoái có kỳ hạn. Các giao dịch giao ngay

business days later (the value date).

được thực hiện dưới hình thức mua bán ngoại tệ theo tỷ giá
giao ngay hoặc kết thúc thanh toán trong vòng 2 ngày làm

Forward transactions involve a delivery date further into

việc tiếp theo (Kỳ hạn thanh toán).

the future, possibly as far as a year or more ahead. By buying or

selling in the forward market a bank can, on its own behalf or

•

Giao dịch hối đoái có kỳ hạn tức là kỳ hạn thanh toán ở thời

that of a customer, protect the value of anticipated flows of

điểm khác trong tương lai, có thể là trong vòng một

foreign currency from exchange rate volatility.

năm.Bằng cách mua và bán tại thị trường giao dịch kỳ hạn,
một ngân hàng có thể đại diện cho khách hàng, bảo vệ
nguồn vốn ngoại tệ tránh những biến động của tỷ giá hối
đoái.


Broadly speaking, there are three types of participants in the market: customers, such as
multinational corporations, are in the market because they require foreign currency in the course of their
cross border trade or investment business. Some banks participates as market makers; that is their dealers
will at any time quote buying and selling rates for currencies – dollars to the pound, deutschemarks to the
dollar and so on. Other banks or corporations call them ask for their rates, and then buy or sell as the caller
choose. The dealers earn a profit on the difference between their buying and selling rates, but clearly they
have to be ready to change their prices very quickly so that they avoid holding large volumes of a depreciating
currency, or being short of a rising currency.


•


The third type of participant, the brokers, acts as intermediaries between the
banks. They are specialist companies with the telephone lines to the banks
throughout the world so that at any time they should know which bank has the
highest bid (buying) rate for a currency and which the lowest offer (selling) rate.
By calling a broker, therefore, it should be possible for banks to find the best
dealing rate currently available. The broker doesn’t deal on his own account but
charges a commission for his services.


COMPREHENSION QUESTIONS

6. How many types of participants are there?
Who are they?
There are 3 types:

-

Customers
Market makers
Brokers

7. For what purpose do multinational corporations need foreign currencies?
They are in the market because they need foreign currency for their sea-crossed
business.


COMPREHENSION QUESTIONS

•
•

•
•

8.What do the terms “bid rates” and “offer rates” mean?
Bit rate is buying rate and offer rate is selling rate.
9. How do brokers participate in the foreign exchange market?
They act as intermediaries between the banks – call the bank to know the bid
rates and offer rates and then offer banks with their services.


Translation
Broadly speaking, there are three types of participants in the market:
customers, such as multinational corporations, are in the market because they
require foreign currency in the course of their cross border trade or investment
business. Some banks participates as market makers; that is their dealers will

Nhìn chung, thị trường gồm có 3 bên tham gia: Khách hàng

at any time quote buying and selling rates for currencies – dollars to the

(VD: tập đoàn đa quốc gia) cần ngoại tệ để giao thương với nước

pound, deutschemarks to the dollar and so on. Other banks or corporations call

ngoài. Một số ngân hàng tham gia với tư cách nhà tạo lập thị

them ask for their rates, and then buy or sell as the caller choose. The dealers
earn a profit on the difference between their buying and selling rates, but
clearly they have to be ready to change their prices very quickly so that they
avoid holding large volumes of a depreciating currency, or being short of a

rising currency

trường; họ có thể tự ấn định giá mua và giá bán ngoại tệ - Đô-la
sang bảng Anh, Mác sang Đô-la,…. Một số tổ chức và ngân hàng
khác sẽ liên lạc với nhóm tạo lập thị trường để biết được tỷ giá, sau
đó lệnh mua-bán sẽ được khớp ngay theo ý muốn. Nhóm tạo lập thị
trường này kiếm lợi nhuận nhờ vào chênh lệch giá mua và bán,
nhưng cũng nhớ rằng họ phải thay đổi giá thật nhanh để tránh
trường hợp tỷ giá ngoại tệ đồng loạt đi xuống hoặc có ít tỷ giá tăng. 


Translation
The third type of participant, the
brokers, acts as intermediaries between
the banks. They are specialist companies
with the telephone lines to the banks
throughout the world so that at any time
they should know which bank has the
highest bid (buying) rate for a currency
and which the lowest offer (selling) rate.
By calling a broker, therefore, it should be
possible for banks to find the best dealing
rate currently available. The broker
doesn’t deal on his own account but
charges a commission for his services.

Bên tham gia thứ 3, hay còn gọi là
nhà môi giới, đóng vai trò trung gian giữa
các ngân hàng. Họ là các chuyên viên ở
các công ty làm nhiệm vụ liên lạc với các

ngân hàng trên khắp thế giới qua điện
thoại để lúc nào cũng nắm được nơi nào
có tỷ giá mua cao nhất và đâu là nơi có tỷ
giá bán thấp nhất. Như vậy, liên lạc với
các nhà môi giới giúp cho ngân hàng có
khả năng tìm được tỷ giá tối ưu nhất hiện
có. Nhà môi giới không thực hiện giao
dịch cho riêng mình nhưng sẽ tính phí từ
dịch vụ họ cung cấp.


Summary:
•

The foreign exchange market is an over-the-counter market in which national currencies are exchanged. It trades 24 hours a day
throughout many financial centers and among them, London is the world’s largest foreign exchange center thanks to the large
volume of international financial business generated here (Eurobonds, insurance, shipping,…) and its geographical location.

•

There are 2 types of transactions in this market: spot business (transactions are undertaken and the value date is within 2 days)
and forward business (transactions are undertaken and the value date is from 3 days to a year).

•

The foreign exchange market is filled with 3 parties: customers (seeking foreign currencies for sea-crossed business), market
makers (such banks work as dealers who quote buying, selling rates for currencies and buy or sell as caller chooses) and brokers
(offering consulting service related to currency rates). As the globalization process is rapidly promoted, the foreign exchange
market is also moving forward with a light-like speed.