FOREIGN

EXCHANGE
MANAGEMENT
READY RATES BASED

ON

CROSS RATES
 Dollar against Foreign Currency Quotation Foreign Currency Quotation against Dollar
Say, 1 dollar against Swiss franc & Japanese Yen are quoted as Say, 1pound sterling and 1 Euro against dollar are quoted as
Swiss Franc(CHF) Japanese Yen(JPY) Pound Sterling(₤) Euro(€)
Spot 1.5425/40 104.67/70 Spot 1.4326/48 1.0325/35
1 month forward 50/60 17/16 1 month forward 50/53 65/62
2 months forward 70/80 30/29 2 months forward 90/93 84/82
Forward margin(Swap Margin or Swap Points) is quoted in terms Forward margin(Swap Margin or Swap Points) is quoted in
of points . A point is the last decimal place in the exchange terms of points . A point is the last decimal place in the
quotation. Thus in a four digit quotation, a point is 0.0001. Like exchange quotation. Thus in a four digit quotation, a point is
in two decimal quotation it is 0.01. 0.0001. Like in two decimal quotation it is 0.01.
Forwards margin for dollar is CHF0.0050/0.0060. As forward Against dollar, the forward pound sterling is at premium.
margin is in ascending order, currency is at premium. We know, Premium should be added to the spot rate to arrive the
premium is added to spot rate to arrive at forward rates, both in forward rate. Thus the forward rates for pound sterling are
respect of purchase and sale transactions . Therefore Pound sterling Buying Pound Sterling
Dollar Buying Dollar Selling Selling
1 month forward CHF 1.5475 1.5500 1 month forward USD 1.4376 1.4401
2 months forward CHF 1.5495 1.5520 2 months forward USD 1.4416 1.4441
As against JPY the forward dollar is at a discount (FM descend- Forward Euro is at discount , since the forward margin is
ing order).Discount is deducted from the spot rate to arrive at the quoted in the descending order . Discount should be
forward rates for dollar against JPY, both for buying/selling deducted from the spot rate to arrive at the forward rate.
Dollar Buying Dollar Selling Euro Buying Euro Selling
1 month forward JPY 104.50 104.54 1 month forward USD 1.0260 1.0273
2 months forward JPY 104.37 104.41 2 months forward USD 1.0241 1.0253
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
 CHF10000
SALE PURCHASE
Exporter $ALE US
SALE DOLLAR IN
SBI INTER
$ALE CHF
IN BANK
SINGAPUR MARKET
MARKET GET
GET US INDIAN
DOLLAR RUPEES &
PURCHASE PURCHASE
DELIVERE
TO
IMPORTER BOB
EXPORTER

SALE
In India, buying rates are calculated on the assumption, the foreign exchange acquired
(CHF)is disposed of abroad in the international market & proceeds realized in US dollar.
 US dollar thus acquired would be sold in the local interbank market to realize Rupee.
For example , if a bank purchases CHF10,000 export bill, bank will sell CHF at
Singapore market and acquire US dollar there.
 US dollar then sold in Interbank market against Indian Rupee. Thus bank would get
rate for US dollar in terms of rupees in India. DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS

Fixing rate of exchange between the foreign currency and Indian Rupee through the
medium of some other currency is done by a method known as chain rule. The rates
thus derived is the cross rate between these currencies.
 Let assume, in the interbank market Rupee/Dollar is quoted at Rs68.5000 and at
Singapore market the CHF/Dollar is quoted at CHF 0.9855. With this information,
the exchange rate of CHF in terms of Rupee is calculated as under
Equation is ? Rs=CH F1, If CHF 0.9855=USD1 & USD1=68.5000
Therefore, 1CHF=68.5000/0.9855=Rs69.50
 EXPORT: BUYING FOREIGN CURRENCY from CUSTOMERS(CHF)
Activity A. Selling of CHF and acquired Dollar in Singapur
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
Step 1: Apply Spot Selling Rate
Step 2: When Currency is at Premium add with spot rate
OR
When Currency is at Discount deduct from spot rate

Activity B. As you need to sell Dollar in interbank, some body will buy Dollar from
you.
Step1: Apply: Interbank Buying Rate of Dollar with Rupee
Step 2: If Dollar is at premium apply spot buying rate
OR (Transit period-25days)
If Dollar is at discount apply one month forward buying rate
Step 3: Deduct Exchange Margin
Buying rate for CHF =B/A
 IMPORT: SELLING FOREIGN CURRENCY to CUSTOMERS(CHF)
Activity A.
Acquire CHF by selling equivalent Dollar in Singapore. Somebody in
Singapore has to buy the said dollar.
Step1: Apply: Spot buying Rate of Dollar with CHF
Activity B.
US Dollar required to effect this sale in Singapore , Bank need to buy dollar
in the interbank market at the market selling rate.
Therefore, you have to sell Dollar in interbank market and to get Rupee
Step 1: Apply Spot Selling Rate
Step 2: Add exchange margin for TT Selling Rate
AND
Add exchange margin for Bill Selling Rate
Selling Rate for CHF= B/A

DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS

One of the customer,on10th Aug requests Bank has to quote bill buying rate to the customer
bank to quote a rate for purchase of export
bill for Singapore Dollar 1,00,000. Assuming US dollar is at a premium against Singapore
Rs/US dollar quoted in the interbank market dollar. Since this is a selling rate, the transit
Spot USD 1 = Rs68.5500/5600 period will be rounded off to the same month
1 month forward =Rs68.3500/3600 and one month forward Singapore dollar/
2 months forward = Rs68.0500/0600 USD selling rate will be taken
3 months forward = Rs67.7600/7700 SGD/US dollar spot selling rate SGD1.3750
Singapore dollars are quoted in Singapore Add premium for one month 0.0045
market as under Dollar is at a PREMIUM against rupee. Since SGD1.3795
Spot USD 1 = SGD1.3630/3750 this is a buying rate , the transit period will be
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
1 month forward 0.0040/0.0045 rounded off to the previous month
2 months forward 0.0060/0.0065 rupee/dollar buying rate will be taken 68.55000
3 months forward 0.0080/0.0085 Rupee/Dollar one month forward buying rate 0.06855
What will be the rate quoted to the customer? Less Exchange Margin at 0.10% 68.4815
Also calculate the rupee amount payable to Bill Buying Rate for dollar
the customer and the interest to be recovered. Bill buying rate for SGD (68.4815/1.3795) =49.64226
Notes: Amount eligible for customer(1,00,000X
1) Transit period is 25 days 49.6425)=Rs 49,64,250
2) Exchange Margin to be included in the Interest to be recovered @10% for 25
rate is 0.10% days=Rs34,001/,Net- Rs 49,30,249
3) Interest to be recovered @10%
Rule2
BUY
If currency is at a premium, rate should be the month before due [Link] due date
arrived Aug month, Rate should be July.

SALE
JUST RVEERSE
RATE QUOTE AUG DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS

Rule 3
BUY
If curreny is at a discount, rate should be on the due date month. i.e. if due date falls on
Aug, rate should be Aug.

SALE
JUST REVERESE
DUE DATE JULY
On 19th June, an exporter tenders 30 days export bill for CHF 50,000 drawn under letter
of credit. 50% of the value of the bill is required to be retained in foreign exchange.(EEFC
Account),Assuming
A. In the interbank market the rates for US dollar were as under
Spot (19/6) USD 1= Rs70.3225/3750
1 month forward 5000/5500
2 months forward 8500/9000
3 months forward 11000/11500
[Link] was quoted in Singapore as follows
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
Spot (19/6) USD1= CHF 0.8250/8375
1 month forward 0050/0055
2 months forward 0105/0110
3 month forward 0155/0160
REQUIRED (a)The exchange rate to quote
(b)The rupee amount to be paid
( c) Interest to be recovered
(d)Transit period 25days & interest @10%
(e) Exchange Margin is 0.10%
On 19th June, an exporter tenders 30 days Bank has to quote 30 days bill buying rate for CHF. The transit and
export bill for CHF 50,000 drawn under Usance involve 55 days.(Due date on 13/8)
letter of credit. 50% of the value of the bill In the dollar /rupee quote ,dollar is at a premium (Forward margin
is required to be retained in foreign in ascending order). The transit and Usance period will be rounded
exchange.(EEFC Account) off to the lower month (July)and one month forward buying rate for
Assuming dollar will be taken.
A. In the interbank market the rates for Rupee/Dollar market spot buying rate Rs70.32250
US dollar were as under Add: Premium for one month 0.50000
Spot (19/6) USD 1= Rs70.3225/3750 Rs70.82250
1 month forward 5000/5500 Less Exchange Margin 0.10% on 70.82250 0.07082
2 months forward 8500/9000 Buying rate for Dollar Rs 70.75168
3 months forward 11000/11500 DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS

[Link] was quoted in Singapore as follows In the Dollar/CHF quote, CHF is at a premium( Forward margin in
Spot USD1= CHF 0.8250/0.8375 ascending order). The transit and Usance period will be rounded off
1 month forward 50/55 to the higher month.
2 months forward 0105/0110 Dollar/CHF market spot selling rate CHF0.8375
3 month forward 0155/0160 Add: Premium for two months 0.0110
(a) The exchange rate to quote CHF0.8485
(b) The rupee amount to be paid Bill buying rate for Euro(70.75168/0.8485) Rs83.38442
(c) Interest to be recovered Rounded off to nearest multiple of 0.0025 Rs83.3850
(i) Transit period 25days&interest @10% Rate quoted to Customer Rs83.3850
(ii) Exchange Margin is 0.10% Amount eligible for customer CHF25,000X83.3850 Rs20,84,625
(iii) Exchange rate to quote as per FEDAI Interest Recovered for 55 days Rs31,410, Net paid Rs20,53,215
On 24th June, an exporter tenders 60 days export bill for CHF1,00,000 drawn under
letter of credit. 25% of the value of the bill is required to be retained in foreign exchange.
Assuming
A. In the interbank market the rates for
US dollar were as under
Spot (24/6) USD 1= Rs70.3225/3750
1 month forward 70.2225/2255
2 months forward 70.1250/1280
3 months forward 69.9900/9950
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
[Link] was quoted in Singapore as follows
Spot (24/6) USD1= CHF 0.8250/8375
1 month forward 0050/0055
2 months forward 0105/0110
Required: 3 month forward 0155/0160
(a)The exchange rate to quote
(b)The rupee amount to be paid
(c)Interest to be recovered
(i) Transit period 25days&interest @12%
On 24th June, an exporter tenders 60 Bank has to quote 60 days bill buying rate for CHF. The transit and
days export bill for CHF1,00,000 drawn Usance involve 85 days.(Due date falls on 16/9)
under letter of credit. 25% of the value In the dollar /rupee quote ,dollar is at a discount(Forward rate in
of the bill is required to be retained in descending order). The transit and Usance period will be rounded
foreign exchange. Assuming off to the due date month(Third Month) as quote is for buying rate
A. In the interbank market the of dollar in interbank market.
rates for US dollar were as under In the Dollar/CHF quote, CHF is at a premium( Forward margin in
Spot (24) USD 1= Rs70.3225/3750 ascending order). The transit and Usance period will be rounded off
1 month forward Rs70.2225/2255 to the due date month(Sept) as it is a sale transaction.
2 months forward Rs70.1250/1280 Dollar/CHF market spot selling rate CHF 0.8375
3 months forward Rs 69.9900/9950 Add: Premium for three months 0.0160
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
[Link] was quoted in Singapore as Selling Rate CHF 0.8535
follows Rupee/Dollar market spot buying rate Rs70.32250
Spot (24/6) USD1= CHF 0.8250/8375 3rd month forward buying rate Rs 69.99000
1 month forward 0060/0070 (As Buy transaction and currency is at discount)
2 months forward 0110/0120 Less Exchange Margin 0.11% on 69.9900 Rs 0.076989
3 month forward 0150/0160 Buying rate for Dollar Rs 69.913011
(a) The exchange rate to quote Bill buying rate for CHF(69.913011 /0.8535) Rs81.91331
(b) The rupee amount to be paid Rounded off to nearest multiple of 0.0025(FEDAI) Rs81.9125
(c) Interest to be recovered Amount eligible for customer
(i) Transit period 25days&interest 12% CHF75,000X81.9125 Rs61,43,440
(ii) Exchange Margin is 0.11% Interest Recovered for 85 days Rs171680,Net paid Rs59,71,760
On 24th June, an exporter tenders 45 days export bill for CAD 25,000 drawn under letter
of credit. 50% of the value of the bill is required to be retained in foreign exchange.
A. In the interbank market the rates for
US dollar were as under
Spot (24/6) USD 1= Rs70.3225/3750
1 month forward 5000/5500
2 months forward 8500/9000
3 months forward 9500/9990
B. CAD was quoted in Singapore as follows1
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
Spot(24/6) USD1= CAD1.1765/1785
1 month forward 60/50
2 months forward 90/80
3 month forward 140/130
(a)The exchange rate to quote
(b)The rupee amount to be paid
(c)Interest to be recovered
(i) Transit period 25days&interest @9%
(ii)Exchange Margin is 0.08%
On 24th June, an exporter tenders 45 days Bank has to quote 45 days bill buying rate for CAD. The transit
export bill for CHF 25,000 drawn under and Usance involve 70 days.(Due date 2/9)
letter of credit. 50% of the value of the bill In the dollar /rupee quote ,dollar is at a premium (Forward margin
is required to be retained in foreign in ascending order). The transit and Usance period will be rounded
exchange. off to the lower month from due date([Link]) and two month
Assuming forward buying rate for dollar will be taken.
A. In the interbank market the rates for In the Dollar/CAD, CAD is at a discount( Forward margin in
US dollar were as under descending order). The transit and Usance period will be rounded
Spot (24/6) USD 1= Rs70.3225/3750 off to previous month of due date [Link] as it is a sale transaction.
1 month forward 5000/5500 Dollar/CAD market spot SELLING rate CAD 1.1785
2 months forward 8500/9000 Less Discount for two months 0.0080
3 months forward 9500/9990 DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
CAD 1.1705
B. CAD is quoted in Singapore as follows Dollar/Rupee market spot buying rate Rs70.32250
Spot924/6) USD1= CAD 1.1765/1785 Add: Premium for two month 0.85000
1 month forward 60/50 Rs71.17250
2 months forward 90/80 Less Exchange Margin 0.08% on 71.1725 0.05693
3 month forward 140/130 Buying rate for Dollar Rs 71.11557
(a) The exchange rate to quote Bill buying rate for CAD(71.11557/ 1.1705) Rs60.75657
(b) The rupee amount to be paid Rounded off to nearest multiple of 0.0025 Rs60.7575
(c) Interest to be recovered Rate quoted to Customer Rs60.7575
(i) Transit period 25days&interest @9% Amount eligible for customer US$12,500X60.7575 Rs7,59,470
(ii) Exchange Margin is 0.08% Interest Recovered for 70 days Rs13,110, Net paid Rs7,46,360
(iii) Exchange rate to quote as per FEDAI
On 26 th June dollar is quoted in First we calculate the selling rate for US Dollar
the interbank market
Spot USD1=RS 68.6025/6100 Rupee/Dollar market spot selling rate 68.6100
Spot July 0500/0600 Add exchange margin @0.10% on 0.0686
Spot Aug 1500/1600 68.6100
At Singapore Malaysian TT selling for dollar Rs 68.6786
Ringgits (MYR) are quoted Add Exchange Margin @ 0.15% on 0.1030
Spot USD1 =MYR 4.0710/50 Bill selling rate for dollar Rs 68.7816
1 MONTH 24/26 1) TT Selling Rate for MYR
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS

2 MONTHS 48/50 Rupee/Dollar TT selling rate Rs 68.6786

The bank requires exchange MYR/Dollar spot buying rate MYR4.0710
margin 0.10% on TT selling Rupee/MYR TT selling rate Rs16.8700
rate and 0.15% on bills selling (68.6786/4.0710)
1) Y K Kapoor requested for a 2). Bill Selling Rate for MYR
bank draft for MYR5,000 Rupee/Dollar bill selling rate Rs 68.7816
2) M/S High Tech Ltd desire to MYR/Dollar spot buying rate MYR4.0710
retire one import bill for Rupee/MYR Bill selling rate
MYR15,000 (Rs68.7816/4.0710) Rs 16.8955
SBI issued a demand draft to its Solution: The bank cancels the demand draft at TT
customer A for Canadian dollar buying rate.
50,000 at CAD1=Rs52.4850. Canadian dollar/US dollar market CAD1.3075
However, after a few days A selling rate
requested the bank to cancel the Rupee/US Dollar market buying rate Rs68.32250
draft and repay the rupee Less Exchange Margin(0.08% 0n 0.05465
equivalent. Assuming Canadian 68.3225 Rs68.26785
dollars were quoted in the
Singapore Foreign Exchange Canadian dollar TT buying rate
Market at (68.26785/1.3075=Rs51.212504 or
USD1=CAD 1.3025/3075 Rs51.2125
& in the interbank market Amount paid by A at the time of
USD1=Rs68.3225/68.3300. purchase of DD
How much the customer will gain CAD50000XRs52.4850=Rs26,24,250
or loose on cancellation of the Amount received by A on cancellation
draft? (50,000XRs51.2125=Rs25,60,625
Exchange margin on TT selling Loss=Rs26,24,250-Rs25,60,625)
DO NOT SHARE THE SLIDES WITH ANYBODY OUTSIDE THE CAMPUS
is0.08%. =Rs63,625
 GOOD
WISHES
TO
ALL