your information, we have provided some useful terminology that
is used within our industry.
The minimum rate at which the Bank of Canada makes short-term
advances to the chartered banks, other members of
the Canadian Payment Association, and investment dealers.
Since 1980, the Bank Rate has been set at ¼ of 1% (25
basis points) above the weekly average tender rate of 91-day
Government of Canada treasury bills.
One who expects that the market price of a particular currency
or the market itself will decline.
Bid and Asked Quotations
Bid is the highest price a prospective buyer is willing to
pay. Asked is the lowest price the seller will accept. Together
they are referred to as a 'quotation' or 'quote.'
One who expects that the market or the market price of a particular
currency will rise.
A rising market.
Also called a contract. A printed acknowledgment giving
details of the purchase or sale of a currency and normally
mailed to a client by the broker within 24 hours of an order
information about the Products and Services we provide
to our corporate clients, click on the following:
- Spot Contracts
- Multi-Currency Drafts
- Wire Settlements
- Customized Orders
(ATM, MIT, O/O, SLO)
- Rate Updates
- Round the Clock Rate Watch
- Foreign Cheques and Wire Receipts
The amount of money at risk due to foreign exchange rate movements.
Currency and money claims, such as bank balances and bank drafts,
expressed in the equivalent value in foreign money. Thus, a pound
sterling note is money in Great Britain but is foreign exchange
in the U.S. The term foreign exchange is also used to refer to transactions
involving the conversion or transfer of money from one country into
the money of a different country. The use of foreign exchange arises
because different countries have different monetary units and the
currency of one country cannot be used for making payments in another
A protective measure intended to reduce the risk of loss from price
fluctuations in a transaction.
Statistical data which, on average, indicate highs and lows in the
business cycle ahead for the economy as a whole. They relate to
capital investment, business start-ups and failures, corporate profits,
stock prices, inventory adjustments, housing starts and certain
Because of the foreign exchange risk on forward contracts, an acceptable
collateral is required from the client.
The lowest price at which a person is willing to sell a currency.
The opposite is a bid, which is the highest price at which one is
willing to buy.
Foreign exchange is a commodity and its price fluctuates in accordance
with supply and demand. By international agreement, fixed exchange
rates with a narrow margin of fluctuation existed until 1973, when
floating rates were adopted that fluctuate as supply and demand
dictate. Ordinarily, and without government restrictions, the rate
of exchange will depend on the relative purchasing power of the
two currencies in the world markets. Gold and wealth tend to flow
from countries that buy more than they sell abroad. At times, speculation
in foreign exchange by dealers, brokers or investors becomes a major
influence on exchange rates.
The interest rate charged by banks to their most credit-worthy borrowers.
A quotation (or quote) is an indication of the market value of a
currency. This is not considered a commitment.
Real Interest Rate
The nominal rate of interest minus the percentage change in the
Consumer Price Index (the rate of inflation).
Settlement or Value Date
The date on which a currency buyer must pay for a purchase or a
seller must deliver the currencies sold. For most currencies, settlement
must be made on or before the second business day following the
transaction date. An exception to this rule are forward contracts
which have a settlement date for a specified time in the future.
The exchange of one currency for another at a specified rate, for
immediate delivery. A spot transaction is the most common type of
foreign exchange trade.
The gap between bid and asked prices in the quotation for a currency.
A market offering comparatively few bids to buy or offers to sell
(or both). The phrase applies to both a single currency or to the
entire currency market and signifies that price fluctuations between
transactions are usually larger than when the market is liquid.
A thin market in a specific currency may represent disinterest in
that currency or a limited supply.
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