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FOREIGN EXCHANGE MARKETS

FOREIGN EXCHANGE MARKETS. MAJOR MARKETS INTERNATIONAL FINANCIAL CENTRES. Most important markets: London, Tokyo, and New York Important regional centers Paris, Zurich, Geneva, Amsterdam, Singapore, Hong Kong Offshore financial centers

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FOREIGN EXCHANGE MARKETS

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  1. FOREIGN EXCHANGE MARKETS

  2. MAJOR MARKETSINTERNATIONAL FINANCIAL CENTRES • Most important markets: London, Tokyo, and New York • Important regional centers Paris, Zurich, Geneva, Amsterdam, Singapore, Hong Kong • Offshore financial centers Luxembourg, Cayman Islands, the Bahamas, British Virgin Islands, Bahrain, Jersey, Guernsey, the Isle of Man. Ireland , Mauritius

  3. MOTIVES FOR DEALING IN INTERNATIONAL FINANCIAL MARKETS • Motives for investing in foreign markets Economic conditions Exchange rate expectations International diversification • Motives for providing credit in foreign markets High foreign interest rates exchange rate expectations International diversification • Motives for borrowing in foreign markets Low interest rates Exchange rate expectations

  4. TYPES OF INTERNATIONAL FINANCIAL MARKETS • National Financial market: Domestic investor/depositor to domestic borrower • Foreign financial market: Domestic investor/depositor to foreign borrower; foreign investor/depositor to domestic borrower • “Offshore” or “Overseas”: Foreign investor/depositor to foreign borrower; foreign funds to foreign users • Eurocurrency markets: Banks that accept deposits and make loans in foreign currencies

  5. Major World Foreign Exchange Markets Pacific Rim -- Hong Kong, Singapore, Tokyo Europe -- London, Frankfurt, Zurich United States -- New York, San Francisco

  6. CHARACTERISTICS AND PLAYERS INFOREIGN EXCHANGE MARKETS • Similar to over-the-counter market for equity securities, i.e., no central meeting place • Principal means of transacting business is via telephone, fax, and computers • Major participants are commercial banks in different countries Retail level -- Deal with exporters, importers, corporations, etc. Wholesale level - Interbank market • Other players include foreign exchange brokers, central banks of individual countries

  7. Activity • Investigate the essential requirements of an offshore financial centre.

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