Foreign Exchange

Exchange Rates Currency band Exchange rate Exchange rate regime Fixed exchange rate Floating exchange rate Linked exchange rate In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. ... Image File history File links Forex. ... The currency band is a system of exchange rates by which a floating currency is backed by hard money. ... The exchange rate regime is the way a country manages its currency in respect to foreign currencies and the foreign exchange market. ... A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. ... A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currencys value is allowed to fluctuate according to the foreign exchange market. ...

Markets Foreign exchange market Futures exchange The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ... A futures exchange, or futures and options exchange is a corporation or mutual organization which provides the facilities to trade derivatives such as futures contracts and options. ...

Products Currency Currency future Forex swap Currency swap Foreign exchange option A currency future, also FX future or foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the last trading date. ... A Forex swap is an over the counter short term interest rate derivative instrument. ... A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped. ... In finance, a foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. ...

See also Bureau de Change A Bureau de Change is an organisation or facility which allows customers to exchange one currency for another. ...

A linked exchange rate system is a type of exchange rate regime to link the exchange rate of a currency to another. It is the exchange rate system implemented in Hong Kong to stablise the exchange rate between Hong Kong dollar (HKD) and United States dollar (USD). The exchange rate regime is the way a country manages its currency in respect to foreign currencies and the foreign exchange market. ... The Hong Kong dollar (currency code HKD) is the currency of the Hong Kong Special Administrative Region of the Peoples Republic of China, and has been the currency of Hong Kong since 1937. ... ISO 4217 Code USD User(s) the United States, the British Virgin Islands, East Timor, Ecuador, El Salvador, the Marshall Islands, Micronesia, Palau, Panama, Turks and Caicos Islands, and the insular areas of the United States Inflation 3. ...

Unlike a fixed exchange rate system, the government or the central bank does not actively interfere in the foreign exchange market by controlling supply and demand of the currency, in order to influence the exchange rate. The exchange rate is stabilised by a mechanism. A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. ...

History

The linked exchange rate system has been adopted in Hong Kong since October 17, 1983 through the currency board system, of which the issue and redemption of certificates of indebtedness (for backing the banknotes) by the note-issuing banks be made against US dollars at an internal fixed exchange rate of HK$7.80:US$1^[1]. October 17 is the 290th day of the year (291st in leap years) in the Gregorian calendar. ... 1983 (MCMLXXXIII) was a common year starting on Saturday of the Gregorian calendar. ... The Hong Kong Monetary Authority (Traditional Chinese: 香港金融管理局) or HKMA (金管局) in short is a government authority founded on 1st April 1993 in Hong Kong from the consolidation of the Office of the Exchange Fund and the Office of the Commissioner of Banking. ... A £20 Ulster Bank banknote. ... The United States dollar is the official currency of the United States. ...

The Hong Kong Monetary Authority (HKMA), Hong Kong's de facto central bank, authorised note-issuing banks are to issue banknotes. These banks are required to have the same amount of USD to issue banknotes. The HKMA guarantees to exchange USD into HKD, or vice versa, at the rate of 7.80. When the market rate is below 7.80, the banks will convert USD for HKD from the HKMA, HKD supply will be increased, and the market rate will climb back to 7.80. The same mechanism also works when the market rate is above 7.80, and the banks will convert HKD for USD. The Hong Kong Monetary Authority (Traditional Chinese: 香港金融管理局) or HKMA (金管局) in short is a government authority founded on 1st April 1993 in Hong Kong from the consolidation of the Office of the Exchange Fund and the Office of the Commissioner of Banking. ... A £20 Ulster Bank banknote. ... The United States dollar is the official currency of the United States. ... The United States dollar is the official currency of the United States. ... The Hong Kong Dollar (ISO 4217: HKD) is the official currency of the Hong Kong Special Administrative Region (SAR) within the Peoples Republic of China. ...

In practice, the HKMA also set a lower limit at 7.80 (7.85 as an upper limit and 7.75 as a lower limit since May 18, 2005) for the HKD to flow within. The HKMA will buy or sell HKD in the market when the exchange rate is beyond the limit(s). The HKD is backed by one of the world's largest foreign exchange reserves, which is several times the amount of money supplied in circulation. May 18 is the 138th day of the year in the Gregorian Calendar (139th in leap years). ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ... Foreign exchange reserves are the foreign currency deposits held by national banks of different nations. ...

Notes and references

1. ^ Linked Exchange Rate System at Hong Kong government website

External links

• Linked Exchange Rate System at Hong Kong Monetary Authority (HKMA)