Here are some notes on some basic exchange rate arithmetic in Indian forex in detail:
- Exchange rate arithmetic is the process of calculating the value of one currency in terms of another currency. It is a simple process, but it is important to understand the basics in order to trade currencies effectively.
Here are some of the basic concepts of exchange rate arithmetic:
- Direct quote: In a direct quote, the price of a currency is quoted in terms of another currency. For example, the price of the US dollar in Indian rupees would be quoted as INR/USD.
- Indirect quote: In an indirect quote, the price of a currency is quoted in terms of its own currency. For example, the price of the Indian rupee in US dollars would be quoted as USD/INR.
- Cross rate: A cross rate is the exchange rate between two currencies that are not the domestic currency. For example, the cross rate between the US dollar and the Japanese yen would be quoted as USD/JPY.
- Spot rate: The spot rate is the current exchange rate between two currencies.
- Forward rate: The forward rate is the exchange rate between two currencies that is agreed upon today but will be delivered at a future date.
Here are some of the basic formulas used in exchange rate arithmetic:
- Direct quote: INR/USD = 1.33
- Indirect quote: USD/INR = 75
- Cross rate: USD/JPY = 110
- Spot rate: INR/USD = 1.33
- Forward rate: INR/USD = 1.35
Here are some additional things to keep in mind about exchange rate arithmetic:
- Exchange rates can be volatile. This means that the value of one currency in terms of another currency can change significantly over a short period of time.
- Exchange rates are affected by a number of factors. These factors include economic conditions, political stability, interest rates, and speculation.
- Exchange rate arithmetic is a simple process. However, it is important to understand the basics in order to trade currencies effectively.