What is the meaning of Forex Reserves?
Forex Reserves Meaning-
Forex reserves is composition of foreign currencies like DOLLARS, JAPANESE YEN,AUD $,GBP,EURO etc
and Gold Reserves of each country are called Forex Reserves.
Importance of Forex Reserves-
USA Dollar is considered as World currency almost 70% of world trade ie imports and exports are done in Dollars.
The more Forex Reserves you have better it is.As the currency of that particular country has great value which holds large Forex Reserves.It can be used for international payments and to maintain value of currency.
Sources of Foreign Exchange
1.Exports
2.Tourism.
3.Services to Foreign Countries
4.Remittences
5.FDI ie Foreign Direct Investment
6.Foreign Aid or loan
Forex Reserves of countries-
source: wikipedia
What is Foreign Exchange Rate?
It is decided by the demand and supply of that particular currency in world.market.
What is Direct Quote?
Direct Quote:Value of currency against One Unit of Other Currency.
Eg 1$=Rs 70
What is Indirect Quote?
Indirect Quote:
Where three currencies are involved
Like 1$=70€ Euro
1€=80 INR
we have to convert currencies into other currencies and make payment.
What is Spot Rate?
Spot Rate:It is Currency Rate available immediately in Currency Market
What is Forward Exchange Rate?
Forward Rate:
It is a rate of currency which is fixed today for delivery on any Future Date.It provides Protection to the trader against Fluctuations in foreign Currencies.
SWIFT SYSTEM-(The Society for Worldwide Interbank Financial Telecommunication)
All foreign trades are done through SWIFT messeging system of USA.It is a network through which Interbank transactions are done quickly,securely and accurately.whenever USA imposes sanctions they can't use dollar as their Currency which hits hard to trade of that country.Therefore Now a days countries are engaging in Swap Arrangements as a solution.But still it impacts massively on international trade.
USA has monopoly in SWIFT Payment system.
Happy Republic Day India
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