Why Money Announcements Move Interest Rates: An Answer from the Foreign Exchange Market

South African investors have been precluded from investing in foreign securities by the Exchange Control Regulations of 1961. Furthermore, the monetary policy pursued by the authorities has resulted in an inefficient financial market. Investments on the capital market have not earned satisfactory real rates of return, and prices on the JSE appear to have been driven to artificial heights. The De Kock Commission of Inquiry has proposed several recommendations which will have far-reaching consequences for investors in South Africa. The proposal of market-related interest rates and the abolition of prescribed investments by institutional investors is likely to result in long-term securities earning substantially higher real rates of return. The relaxation of exchange control for both direct and portfolio investment is likely to stem the flow of funds into the JSE. Investment funds can be expected to flow between the JSE and the various foreign equity markets depending on the economic prospects in the different countries. The high foreign exchange cost and poor liquidity of the local exchange market has been an obstacle to investors in foreign securities. The creation of a larger and more efficient foreign exchange market is likely to facilitate international portfolio diversification in South Africa.

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Covered interest arbitrage opportunities in the South African foreign exchange market

South African Journal of Business Management ◽

10.4102/sajbm.v18i4.1019 ◽

1987 ◽

Vol 18 (4) ◽

pp. 209-214

Author(s):

C. De J. Correia ◽

R. F. Knight

Keyword(s):

Exchange Rate ◽

Interest Rates ◽

South African ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Exchange Market ◽

The South ◽

Dollar Exchange Rate ◽

Interest Parity ◽

Interest Differential

The Interest Parity Theory states that in an efficient market, any interest differential between local and foreign sources of finance will be offset by the forward premium/discount. Therefore, opportunities to engage in profitable Covered Interest Arbitrage transactions will be eliminated quickly. The fall in the Rand/Dollar exchange rate resulted in many South African companies reporting substantial foreign exchange losses on offshore loans. Companies were attracted to foreign sources of finance because of lower foreign interest rates. The authors conclude, on the basis of empirical tests, that the forward Rand/Dollar exchange rate followed its interest parity value very closely over the period August 1983 - August 1985. Opportunities to engage in risk-free arbitrage activities were offset by related transaction costs. The South African foreign exchange market is efficient to the extent that risk-free profit opportunities did not exist for the period under review and therefore there was no benefit, after adjusting for risk, for South African management to borrow from offshore sources of finance.

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Foreign Exchange Market and Interest Rates

Multi-Asset Risk Modeling ◽

10.1016/b978-0-12-401690-3.00007-x ◽

2014 ◽

pp. 217-246

Author(s):

Morton Glantz ◽

Robert Kissell

Keyword(s):

Interest Rates ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Exchange Market

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Interest rates and risk premia in the stock market and in the foreign exchange market

Journal of International Money and Finance ◽

10.1016/0261-5606(87)90016-7 ◽

1987 ◽

Vol 6 (1) ◽

pp. 107-123 ◽

Cited By ~ 104

Author(s):

Alberto Giovannini ◽

Philippe Jorion

Keyword(s):

Stock Market ◽

Interest Rates ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Risk Premia ◽

Exchange Market

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Peru's Black Market in Foreign Exchange

Journal of Interamerican Studies and World Affairs ◽

10.2307/165936 ◽

1991 ◽

Vol 33 (3) ◽

pp. 135-168 ◽

Cited By ~ 3

Author(s):

Robert Grosse

Keyword(s):

Interest Rates ◽

Foreign Exchange ◽

National Economy ◽

Foreign Exchange Market ◽

Foreign Capital ◽

Foreign Debt ◽

Industrial Country ◽

Black Market ◽

Exchange Market ◽

Service Cost

The foreign exchange market in Peru experienced the same kinds of overwhelming volatility and severe shocks as the rest of the national economy during the 1980s. Beginning in 1980, Peru's economy was buffeted by a severe decline in copper prices followed, in 1982, by a huge increase in real debt servicing costs as a result of the drop in industrial-country inflation and remaining high dollar interest rates. This simultaneous squeeze on export earnings and hike in debt service cost led to an inability to meet foreign debt commitments and, essentially, a cutoff from access to foreign capital.

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SPECULATIONS ON THE FOREIGN EXCHANGE MARKET OF UKRAINE

Vìsnik Sumsʹkogo deržavnogo unìversitetu ◽

10.21272/1817-9215.2021.2-17 ◽

2021 ◽

Vol 2021 (2) ◽

Author(s):

D. Bychenko

Keyword(s):

Interest Rates ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Market Development ◽

Exchange Market ◽

Positive Side ◽

Exchange Markets ◽

The Difference ◽

The Moment ◽

The Impact

The foreign exchange market gives a great impetus to economic development and is one of the most critical parts of the financial market. The global daily turnover in the foreign exchange markets (FOREX) has exceeded USD 6.7 billion. At the same time, speculation in the markets gives a qualitative impetus to its development. Of course, it can partially destabilize the situation with quotations due to their ignorance, but in most cases, it is also helpful for the general state of the market. These concepts were studied by the founder of modern economics - J. Keynes, and foreign scientists M. Poyarliev and J. Levych, and Ukrainian scientists also did not bypass this issue. They considered more the peculiarities of the development of the foreign exchange market of Ukraine and the basics of its regulation. Furthermore, only a few considered the process of hedging currency risks and, in part, speculation. The primary purpose of this article is to study the role of speculation in the foreign exchange market of Ukraine and assess their impact on the foreign exchange market development in recent years. We have achieved this goal, namely to consider the main trends of the foreign exchange market in the last three years. On the positive side, Ukraine has already moved away from maintaining the exchange rate, and the NBU is trying to accumulate certain reserves. It is not easy to trace the positive dynamics in the foreign exchange market development due to the impact of pandemic-related lockdowns. There is a noticeable tendency in the market to devalue the Ukrainian hryvnia. We will also consider the types of traders and their main strategies. Pay special attention to care trade and momentum as the most profitable in the foreign exchange market. The core trade is based on the investor's desire to benefit from the difference in interest rates on different currencies, taking into account the risks. The moment is already based on technical analysis from the trader to decide to invest. This study will be helpful for both students and researchers studying financial markets, especially the foreign exchange market. Perhaps ordinary citizens of Ukraine will take it into account and expand their knowledge in the field of investment and trading in currency pairs because a similar article that would it did not concern the Ukrainian market, which is the value of this work.

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A Study On Technical Analysis With Reference To International Forex

Think India ◽

10.26643/think-india.v22i3.8470 ◽

2019 ◽

Vol 22 (3) ◽

pp. 1129-1144

Author(s):

Bichith C. Sekhar ◽

A. Umamaheswari

Keyword(s):

Foreign Exchange ◽

Abnormal Return ◽

Foreign Exchange Market ◽

Relative Strength ◽

Exchange Market ◽

Strength Index ◽

Technical Tool ◽

Alpha Beta ◽

Decentralized Market ◽

Currency Conversion

The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies. The foreign exchange market assists international trade and investments by enabling currency conversion. Our study is to test the technical tools to analyze about the technical impact and its return in the market. For this purpose 13 cross currency pairs were taken as sample size and Jensen’s Alpha, Beta, Relative Strength Index, and Buy and Hold Abnormal Return were used as technical tool for analysis and the conclusion is that it’s not preferred to invest in JPY pairs as the volatility and the return are not up to the mark and its preferred to invest in EURCAD as the return was high when compared to other scripts and the market was moving accordingly to its cross currency pair.

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