1. FOREIGN EXCHANGE QUOTATIONS & RATES
FOREX RATE : THE PRICE OF ONE CURRENCY QUOTED
IN TERMS OF ANOTHER CURRENCY.
THERE ARE TWO TYPES OF QUOTATIONS IN THE
FOREX MARKET. THE AMERICAN QUOTATIONS AND
THE EUROPEAN QUOTATIONS.
THE EUROPEAN QUOTATIONS ARE QUOTES GIVEN AS
“NUMBER OF UNITS OF A CURRENCY PER US
DOLLAR. EXAMPLE : JPY125.65/USD, INR48.75/USD.

2. FOREIGN EXCHANGE QUOTATIONS &
RATES
THE AMERICAN QUOTATIONS ARE QUOTES GIVEN AS
“NUMBER OF US DOLLARS PER UNIT OF A
CURRENCY”. EXAMPLE : USD0.8775/EUR,
USD1.6542/GBP ETC.
DIRECT QUOTES : IN A COUNTRY, DIRECT QUOTES
ARE THOSE THAT GIVE UNITS OF THE HOME
CURRENCY PER UNIT OF A FOREIGN CURRENCY. FOR
EXAMPLE : INR48.59/USD IS A DIRECT QUOTE IN
INDIA, USD 0.6385/CHF IS A DIRECT QUOTE IN ………

3. FOREIGN EXCHANGE QUOTATIONS &
RATES
INDIRECT QUOTES : STATED AS NUMBER OF
UNITS OF A FOREIGN CURRENCY PER UNIT OF
HOME CURRENCY. THUS, USD 0.04132/INR IS A
INDIRECT QUOTE IN INDIA AND JPY 0.243/USD IS
AN INDIRECT QUOTE IN AMERICA.

4. FOREIGN EXCHANGE QUOTATIONS &
RATES
CROSS RATES : GIVEN THE EXCHANGE RATES OF
TWO COUNTRIES, THE EXCHANGE RATE FOR A
THIRD COUNTRY CAN ALSO BE FOUND OUT.
USD 0.02339/BHATT , USD 0.02538 / INR.
WHAT WILL BE THE INR TO BHATT EXCHANGE
RATE ?

5. FOREIGN EXCHANGE QUOTATIONS &
RATES
(i) COST OF ONE INR = 0.02538 USD
(ii) COST OF ONE BHATT = 0.02339 USD
OR 0.02339 USD = ONE BHATT
OR 1 USD
= ONE BHATT/0.02339
OR 0.02538 USD = ONE BHATT X 0.02538
0.02339
OR ONE INR
= 1.085 BHATT.

6. FOREIGN EXCHANGE QUOTATIONS &
RATES
T T BUYING RATE : THE BANKS QUOTE A VARIETY OF
EXCHANGE RATES. ONE OF THEM IS THE T T BUYING
RATE (T T STANDS FOR TELEGRAPHIC TRANSFER).
T T RATES ARE APPLICABLE FOR CLEAN INWARD OR
OUTWARD REMITTANCES WHERE THE BANKS
UNDERTAKE ONLY THE JOB OF MONEY TRANSFER
AND DO NOT HAVE TO PERFORM ANY OTHER
FUNCTION , SUCH AS HANDLING DOCUMENTS.

7. FOREIGN EXCHANGE QUOTATIONS &
RATES
AS FOR EXAMPLE : YOU PURCHASE FROM CITI BANK IN NEW
YORK A DD OF 2000 USD, DRAWN ON CITI BANK-MUMBAI.
THE NEW YORK BANK WILL CREDIT THE MUMBAI BANK’S
ACCOUNT IMMEDIATELY.
WHEN YOU COME BACK TO MUMBAI AND PRESENT THE DD AT
CITI BANK – MUMBAI , THE PARTICULAR BRANCH WILL PAY
YOU AS PER THE TT – BUYING RATE. THE RATE AT WHICH THE
NEW YORK BANK HAD SOLD THE DD TO YOU IS THE TT SELLING
RATE.

8. FOREIGN EXCHANGE QUOTATIONS &
RATES
ANOTHER EXAMPLE COULD BE : AN EXPORTER
ASSIGNS THE BANK THE RESPONSIBILITY OF
COLLECTION OF AN EXPORT BILL. THE BANK MAY
PAY TO THE EXPORTER BEFORE THE COLLECTION
OF THE BILL. HERE ALSO, WHILE MAKING THE
PAYMENT THE BANK WILL ADOPT THE T T
BUYING RATE. (IN THIS CASE THERE WILL BE
ADDITIONAL FLAT FEES APPLICABLE).

9. FOREIGN EXCHANGE QUOTATIONS &
RATES
BILL BUYING RATE : EXPORTERS FREQUENTLY DRAW
BILLS OF EXCHANGE ON THEIR FOREIGN
CUSTOMERS.
THEN THEY SELL THESE BILLS TO AN AUTHORISED
DEALER IN FOREIGN CURRENCY.
THE AUTHORISED DEALER BUYS THE BILL AND THEN
COLLECTS THE PAYMENT FROM THE IMPORTER.

10. FOREIGN EXCHANGE QUOTATIONS &
RATES
SINCE, THERE IS DELAY BETWEEN THE AD PAYING
THE EXPORTER AND ITSELF GETTING PAID,
VARIOUS MARGINS ARE SUBSTRACTED FROM
THE BASE RATE TO COMPUTE THE BILL BUYING
RATE.
SO, BILL BUYING RATE = THE BASE RATE minus
EXCHANGE MARGIN minus FORWARD
DISCOUNT.

11. FOREIGN EXCHANGE QUOTATIONS &
RATES
EXCHANGE MARGIN : THE BANKS HAVE TO
TRANSMIT OR TRANSIT THE CHEQUES OR BILLS
IT HAS RECEIVED, IN WHICH, CONSIDERABLE
AMOUNT OF TIME AND SOME MONEY IS SPENT.
IN ORDER TO RECOVER THIS ALONG WITH
PROFIT THE BANK OR AD CHARGES EXCHANGE
MARGIN.

12. FOREIGN EXCHANGE QUOTATIONS &
RATES
FORWARD MARGIN : BILLS ARE OF TWO KINDS. SIGHT OR
DEMAND BILLS REQUIRE PAYMENT BY THE DRAWEE ON
PRESENTATION. THE DELAY INVOLVED IN PAYMENT OF SUCH
BILLS IS THE TRANSIT PERIOD.
TIME OR USAGE BILLS GIVE TIME TO THE IMPORTER TO SETTLE
THE PAYMENT WHICH MEANS THAT THE EXPORTER HAS GIVEN
CREDIT TO THE IMPORTER. IN SUCH CASES THE DELAY IS BOTH
BECAUSE OF TRANSIT AND CREDIT PERIOD.
IN ADDITION TO THE EXCHANGE MARGIN TO COVER COSTS
AND PROFIT THE AD LOADS FORWARD MARGIN FOR AN
APPROPRIATE PERIOD TO COVER THE DELAY DUE TO CREDIT.

13. FOREIGN EXCHANGE QUOTATIONS &
RATES
BILL SELLING RATE : WHEN AN IMPORTER REQUESTS
THE BANK TO MAKE PAYMENT TO A FOREIGN
SUPPLIER, AGAINST A BILL DRAWN ON AN
IMPORTER, THE BANK HAS TO HANDLE
DOCUMENTS RELATED TO THE TRANSACTION.
FOR THIS, THE BANK LOADS ANOTHER MARGIN ON
THE BASE RATE TO ARRIVE AT THE BILL SELLING
RATE.
HENCE BILL SELLING RATE = BASE RATE +
EXCHANGE MARGIN.