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Risk Considerations Regarding Spot Transactions |
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Credit Risk: A foreign exchange contract poses a risk, much like that a bank incurs whenever it makes a loan to companies or individuals, that the client in question will not deliver the appropriate currency on the agreed upon time. In a foreign exchange contract, the market maker and the client agree that each will deliver to the other a particular amount of currency on a exact date, at a previously established rate. Trading currencies of countries in different time zones compounds this risk.
Market/Price Risk: It is a given that trading in any currency has a certain degree of inevitable risk because currency values rise and fall constantly in response to market pressures. When a client is engaging in a foreign exchange trade, their position is open until it is closed or covered. While the client’s position is open, they are exposed to the risk of changes to the exchange rates. A delay of a few moments can alter a potentially lucrative transaction into a loss.
Country Risk: Due to political situations, governmental regulations and restrictions, or the amount of foreign currency reserves the country holds, some countries and their currencies are more risky than others. However, of the three major types of risk, this is the least significant.
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| Symbol |
Rate |
| GBP:CHF |
2.007608 |
| GBP:JPY |
182.222212 |
| GBP:USD |
1.757198 |
| NZD:USD |
0.658397 |
| EUR:CAD |
1.503413 |
| EUR:CHF |
1.557680 |
| EUR:GBP |
0.775889 |
| EUR:JPY |
141.384148 |
| EUR:USD |
1.363390 |
| AUD:JPY |
80.415028 |
| AUD:USD |
0.775455 |
| USD:CAD |
1.102702 |
| USD:CHF |
1.142505 |
| USD:JPY |
103.700427 |
| USD:SEK |
7.185028 |
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Disclimer: This website is for informational purposes only and is not intended to provide
specific commercial, financial, investment, accounting, tax, or legal advice.
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© ForexCenter.com, 2005, All Rights Reserved
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