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Английский язык. Практический курс для решения бизнес-задач
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Английский язык. Практический курс для решения бизнес-задач Пусенкова Нина

Особенно полезен приход иностранных игроков в отрасли импортозамещения. Прежде всего очень актуально строительство новых заводов в депрессивных регионах, способное частично решить проблему безработицы и пополнения местных бюджетов. Или в сферу услуг: нельзя забывать, что своим рождением и энергичным развитием, к примеру, МТС и «ВымпелКом» во многом обязаны зарубежным акционерам, соответственно немецкому DT и норвежскому Telenor.

Сложнее с сырьевыми отраслями: сотрудничество с грандами мирового бизнеса помогает соответствующим российским компаниям разделить риски наиболее капиталоемких проектов, а в ряде случаев получить доступ к новым рынкам сбыта. И все-таки приоритет национального капитала в сырьевом секторе неизбежен. Но он станет позитивным фактором, только если отечественная бизнес-элита будет становиться ответственней, если государство ужесточит регулирование как в части обязательств перед обществом, так и в части соблюдения лицензионных соглашений. Более чем важна и реализация долгосрочной, а не только краткосрочной стратегии развития. Общеизвестно, что в стране с западными экономическими ценностями, Норвегии, нефтегазовая отрасль в основном контролируется национальными компаниями – Statoil и Norsk Hydro, а международные гранды нефтегазового бизнеса привлекаются при решении конкретных задач, прежде всего технических. При этом инструментарий фондового рынка и наличие таких полезных пиявок, как агрессивно нацеленные на передовые стандарты корпоративного управления и рост прибыльности миноритарные акционеры, заставляют корпорации более активно работать над своей эффективностью и дают им возможность ощутить себя частью глобальной экономики.

Наверное, определенное ограничение иностранного капитала было бы логично в отраслях и конкретных компаниях, у которых имеются уникальные технологии и ресурсы для успешной конкуренции в международном масштабе. Речь может идти в первую очередь о создающейся Объединенной авиастроительной компании. Хотя и в этом случае миноритарный пакет у иностранного стратегического партнера, такого, как EADS, помог бы наладить эффективную кооперацию и технологическое сотрудничество.

Очевидно, что намерение правительства упорядочить присутствие иностранного капитала в российской экономике позволит прояснить правила игры и позитивно прежде всего для самих иностранных инвесторов. Важно лишь, чтобы принятые нормы были прозрачными, не позволяли двойного толкования и не имели в качестве побочного эффекта появления новой коррупционной кормушки для чиновников. Также нужно понимать, что иностранные компании – BP и ConocoPhillips – уже являются акционерами нескольких крупных российских нефтяных компаний и любой поворот назад в этом вопросе будет болезненно воспринят фондовым рынком, сколь короткой ни была бы память инвесторов. Но скорее всего, до этого не дойдет, и будут введены ограничения для иностранцев по участию в освоении месторождений, имеющих стратегический характер, прежде всего с точки зрения обеспечения национальной безопасности. Только взвешенное решение этого вопроса позволит успешно провести планируемые в следующем году IPO госпакетов важнейших компаний нашей экономики, в том числе «Роснефти», Внешторгбанка, «КамАЗа» и Дальневосточного пароходства.

Источник: С. Суверов, начальник центра анализа

рыночной конъюнктуры Газпромбанка. Ведомости, 26.09.05

Lesson 26
Foreign Trade

Read and translate the text and learn terms from the Essential Vocabulary.

The Basics of Foreign Trade

Free Trade Vs. Protectionism

All governments regulate foreign trade. The extent to which they do so is a matter of great controversy and debate. Although the amount of government involvement in trade varies from country to country and product to product, overall barriers to trade have been lowered since World War II.

Arguments for Protection

– Cheap labor: Less developed countries have a natural cost advantage as labor costs in those economies are low. They can produce goods less expensively than developed economies and their goods are more competitive in international markets.

– Infant industries: Protectionists argue that infant industries must be protected to give them time to grow and become strong enough to compete internationally, especially industries that may be a foundation for future growth, e.g. computers and telecommunications.

– National security concerns: Any industry crucial to national security, such as producers of military hardware, should be protected.

– Diversification of the economy: If a country channels all its resources into a few industries, no matter how internationally competitive those industries are, it runs the risk of becoming too dependent on them. Keeping weaker industries competitive through protection may help in diversifying the nation’s economy.

– Lowering environmental standards: In the rush to meet the world demand for their exports, some countries may compromise on environmental standards. This is particularly true for less developed countries that do not have well defined environmental protection laws in place.

Methods of Protection

– Tariffs: Tariffs are taxes on imports. Tariffs make the item more expensive for consumers, thereby reducing the demand. Ad valorem tariffs are usually levied as a percentage of the value of the import, although sometimes a flat rate may be charged.

– Import quotas: Governments sometimes restrict the sale of foreign goods by imposing quotas. They limit the quantity of foreign goods that can be imported and help domestic producers by limiting the share of the market that can be taken by foreigners.

– Voluntary restraints: Sometimes governments negotiate agreements whereby a country agrees to voluntarily limit its export of a certain product. Japan voluntarily limited its export of cars to the United States in 1992 to 1.65 million cars per year.

– Subsidies: Another way to achieve the goals of protectionism is to make the domestic industry more competitive through subsidies.

Subsidies can be:

–Direct – outright payments

–Indirect – special tax breaks or incentives, buying of surplus goods, providing low-interest loans or guaranteeing private loans. For example, the U.S. subsidizes the sugar and dairy industries, among others.

– Trade ban: Sometimes governments ban trade with certain countries for political reasons. Governments also ban import of certain products to protect domestic industries. For instance, Japan bans importation of rice.

– Imposing standards: Health, safety and environmental (HSE) standards often vary from country to country. These may act as a barrier to free trade and a tool of protectionism. For example, the EU has very stringent health and safety standards that goods have to meet in order to be imported.

– Others: Apart from the legal restrictions there may be other less formal obstacles that impede trade. Cultural factors are one such obstacle.

Arguments for Free Trade

U.S. free-trade advocates typically argue that consumers benefit from freer trade. Free trade and the resulting foreign competition forces U.S. companies to keep prices low. Consumers have a larger variety of goods and services to choose from in open markets. Domestic companies have to modernize equipment and technologies to keep themselves competitive.

Any kind of protectionist measures, like tariffs, often bring about retaliatory actions from foreign governments, which may restrict the sale of U.S. goods in their markets. This may result in inflation and unemployment in the U.S. as the export industries suffer and prices of imports rise.

Measures of Trade

Balance of trade and balance of payments are two of the statistics most widely used to measure a country’s international trade position. Balance of trade is the difference between a nation’s exports and imports of both goods and services.

A «favorable» balance of trade, or trade surplus, occurs when exports exceed imports. A «negative» balance, or trade deficit, occurs when the imports surpass exports. From the mid-1970s through 2001, the U.S. ran persistent trade deficits.

The balance of trade alone does not give the whole picture. The detailed record of all economic transactions between a country and the rest of the world is called the balance of payments. This includes trade in:

– Goods and services; and

– Financial and non-financial assets.

The BoP is separated into two main accounts:

–Current account – records export/import of goods and services and interest payments. The merchandise trade balance is contained in this account.

–Capital account – records purchase or sale of assets or investments, like companies, stocks, bonds, bank accounts, real estate and factories.

If you buy an automobile made by a factory in Germany, the transaction will be recorded in the current account. However, if you buy the automobile factory or stock in the automobile factory, the transaction will be a part of the capital account.

Every international transaction automatically enters the BoP twice, once as a credit and once as a debit, resulting in two equal and opposite entries. A transaction that involves money flowing into the country is recorded as a balance of payment credit and anything that draws money out of the country is a balance of payment debit.

This system of double-entry bookkeeping tries to ensure that the current and capital accounts are balanced. However, due to accounting conventions and differences in the recorded values of transactions, this does not always happen. Accounting for these differences, called statistical discrepancies, makes possible the following fundamental identity of the balance of payment accounts:

Current account + Capital account + Statistical discrepancy = 0

Current Account

The current account consists of four sub accounts:

–Merchandise trade consists of all raw materials and manufactured goods bought or sold. Since early 1990s, the merchandise trade account has been combined with services to determine the «balance of trade».

– Services include tourism, transportation, engineering, and business services, such as law, management consulting, and accounting. Fees from patents and copyrights on new technology, software, books, and movies also are recorded in the service category.

–Income receipts record investment incomes made up of interest and dividend payments and earnings of domestic owned firms operating abroad.

–Unilateral transfers are payments that do not correspond to the purchase of any good, service or asset. These usually take the form of international aid, gifts, or worker remittances from abroad.

Capital Account

The capital account measures the difference between sales of assets to foreigners and purchases of assets located abroad. U.S. – owned assets abroad are divided into official reserve assets, government assets, and private assets. These assets include gold, foreign currencies, foreign securities, reserve position in the IMF, U.S. credits and other long-term assets, direct foreign investment, and U.S. claims reported by U.S. banks.

Foreign-owned assets in the U.S. are divided into foreign official assets and other foreign assets. These assets include U.S. government, agency, and corporate securities; direct investment; U.S. currency, and U.S. liabilities reported by U.S. banks.

Balance of Payments Deficit and Surplus

In theory, the current account should balance with the capital account. The sum of the balance of payments statements should be zero. Therefore, when a country buys more goods and services than it sells (a current account deficit), it must finance the difference by borrowing, or by selling more capital assets than it buys (a capital account surplus).

The accounts do not exactly offset each other, due to statistical discrepancies, accounting conventions, and exchange rate movements.

Measuring Imports and Exports

Imports: U.S. importers file tax documents with the U.S. Customs Service describing the type and value of imported goods. These reports are processed and tabulated to arrive at the overall level of U.S. imports. Inaccurate reports, delays in processing data, and smuggling can affect their value.

Exports: There is no tax on exports, so to collect information, the U.S. Department of Commerce developed a form called the Shippers’ Export Declaration (SED) form, which is filled out when goods are sent overseas. These are tallied to arrive at export totals.

The Bretton Woods Agreements Act of 1945 requires the publication of balance of payments information. The statistics are generally reliable although the collection process is often difficult, especially in case of data on travel, services, FDI and financial transactions.

Sometimes it is difficult to classify a good as an import or an export. Trade is usually tabulated on the basis of national origin rather than national ownership. If a product is shipped from the U.S. to Germany, it is considered a U.S. export and a German import. It makes no difference whether a foreign company owns the U.S. factory or if it is a U.S. firm in Germany that imports the product. If a U.S. company owns a plant in Brazil and sells a product to a Japanese company in Canada, the transaction is recorded as a Canadian import and a Brazilian export.

Source: www.newyorkfed.org

Essential Vocabulary

1. infant industry – «молодая» отрасль экономики

2. ad valorem (ad val) – «со стоимости», «адвалорный» (метод расчета налога, тарифа или вознаграждения в форме фиксированного процента от стоимости)

3. levy n – налог, сбор, взнос; арест собственности по судебному приказу

levy v – взимать, собирать (налог)

4. voluntary restraint – добровольное ограничение

5. tax break – налоговая льгота

6. trade ban – запрет на торговлю

7. health, safety and environmental (HSE) standards – стандарты по здравоохранению, безопасности и экологии

8. retaliatory action – ответное действие

9. balance of trade (ВОТ) – торговый баланс

10. favorable balance of trade – положительный (активный) торговый баланс

11. negative (unfavorable) balance of trade – отрицательный (пассивный) торговый баланс

12. merchandise (commodity) trade balance – баланс товарной торговли

13. capital account (с/а) – капитальный счет

14. real estate – недвижимость

15. entry n – бухгалтерская запись (проводка)

16. debit n – дебет, левая сторона счета

debit v – дебетовать счет, записать по дебету счета

17. double-entry bookkeeping – система двойной записи

18. statistical discrepancy – статистическое расхождение

19. international aid – международная помощь

20. remittance (rem) n – денежный перевод, платеж

remit v – переводить, отправлять деньги

21. official reserve assets – официальные резервные активы

22. securities n – ценные бумаги

23. reserve position – сальдо резервов

24. claim n – требование, право, претензия, иск, рекламация; участок земли, отведенный под разработку недр

claim v – требовать, претендовать; утверждать; возбуждать иск о возмещении убытков

25. Сustoms Service – таможенная служба

26. smuggling n – контрабанда

smuggler n – контрабандист

smuggle v – заниматься контрабандой

27. Department of Commerce (US) – Министерство торговли США

28. Shippers’ Export Declaration (SED) – экспортная декларация

Exercise 1. Answer the following questions.

1. What are the arguments that advocates of protectionism usually use? 2. What protectionist tools can governments apply to manage their countries’ international trade positions? 3. What do the US free trade advocates traditionally say to support their views? 4. What are the key measurements of trade? 5. What is the essence of the balance of trade? 6. How is the balance of payments structured? 7. How are exports and imports measured?

Exercise 2*. Match the following definitions with terms given below and make sentences with each terms.

1. With this term of settlement the exporter insists on receiving payment before shipping or dispatching the goods.

2. An order drawn and signed by the exporter (the drawer) addressed to the importer or the bank (the drawee) to pay the exporter (the payee) a certain sum on a specific day.

3. Any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernization, technological upgrading or expansion.

4. Items, which participate in or are required for a manufacturing process, but do not necessarily form part of the end-product. Items, which are substantially or totally consumed during a manufacturing process.

5. Goods, which can directly satisfy human needs without further processing.

6. Processing of or working upon raw materials or semi-finished goods supplied to the job worker so as to complete a part of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process.

7. To make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labeling.

8. This term relates to the form of settlement whereby companies simply invoice their customers and expect to receive payment in due course, usually 30, 60 or 90 days after invoice date.

9. An individual, firm, society, company, or corporation.

10. Basic materials which are needed for the manufacture of goods, but which are still in a natural, unrefined or unmanufactured state.

11. A part or a sub-assembly or assembly for substitution, that is ready to replace an identical or similar part or sub-assembly or assembly. It includes a component or an accessory.

Terms:

jobbing, capital goods, person, bill of exchange, consumables, open account trading, spare part, consumer goods, manufacture, raw material, advance payment

Exercise 3. You are a journalist writing for The Moscow Times and you are to interview a WTO official about the policies and goals of this organization. Make a dialogue between these two individuals using the following briefing materials.

The World Trade Organization (WTO), established on January 1, 1995, is the only global international organization dealing with the rules of trade between nations. It was created by the Uruguay Round of negotiations over a 14-year period and has 144 member countries (as of January 2002). At the heart of the WTO are the various agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. These agreements cover a range of topics:

–Reductions in tariffs;

–Fairer competition in agricultural trade;

–Textiles trade;

–Trade in services;

–Protection and enforcement of intellectual property;

–Issues related to antidumping, export subsidies, and safeguards; and

–Other non-tariff barriers.

The goal of the WTO is to help producers of goods and services, exporters, and importers conduct their business. The agreements have three main objectives:

–To help trade flow as freely as possible,

–To achieve further liberalization gradually through negotiation, and

–To set up an impartial means of settling disputes.

Exercise 4*. Fill in the blanks using terms given below.

Russia’s WTO Accession:

What are the macroeconomic, sector, labor market and household effects?

Accession to the WTO is likely to generate substantial benefits for Russia – about 7% of the value of……. in the medium term and considerably more in the long term. These benefits would come from increased…… by…….. service providers, due to……. to……. the services sectors to foreign investors; from increased……. due to an inflow of imported technology as the result of a reduction in Russian………; and from the improved treatment of Russian exporters in……… cases. The main export sectors are likely to experience the greatest…….. Sectors that export little and that have relatively high……… are likely to……. in the medium term. In the long term, an improvement in the……… should expand the capital stock and incomes.

The vast majority of……… will gain from WTO accession. Government…….. are crucial in helping with the short-run…….. impact from the accession, especially for the poorest members of society. Despite gains in the medium to long term, during a……… period it is possible that many individuals will lose. There will be………workers who have been……… and will need to find new employment. These workers will suffer losses from transitional unemployment and are likely to…….. expenses related to…….. or………. Thus, despite the likely substantial improvement in the……….. for almost all Russian after accession to the WTO and after adjustment to the new equilibrium, the transition will require a strong role for……….

WTO accession is an important step toward an open economy model of development. These results are consistent with international experience of the past 20—30 years that shows that rapid and……….. economic growth has occurred only in countries that progressively liberalized import protection, and who provided……… to exporters that……… the tax that import protection imposes on exports.

Source: Thomas Rutherford, University of Colorado, David Tarr, The World Bank (abridged)

Terms:

sustained, offset, safety nets, relocation, adverse, public policy, transition, return on investment, consumption, unskilled, tariff barriers, living standards, FDI, incur, households, contract, multinational, commitments, liberalize, productivity, antidumping, expansion, import protection, displaced, retraining, incentives

Exercise 5. Translate into English.

Длинный минус

Торговый баланс РФ скоро станет отрицательным. Для большой развивающейся страны это довольно неприятно

Положительное сальдо счета текущих операций – редкое явление. В 2007 г. из 181 страны лишь 65 имели положительный баланс. Россия по объему внешнего профицита была на 5-м месте. Но это ненадолго.

Среднесрочные перспективы России вызывают опасения. МЭРТ полагает, что сальдо счета текущих операций РФ станет отрицательным и закрепится на уровне 2% ВВП уже через 2-3 года. Хотя, несомненно, что положительное сальдо счета текущих операций будет снижаться, нет уверенности, что Россия может себе позволить дефицит по внешним операциям.

В реальном выражении баланс товаров и услуг снижается с 2004 г., когда на фоне быстрорастущего спроса и укрепления рубля реальный объем импорта увеличивался быстрее, чем объем экспорта. В то же время благодаря инфляции цен на топливо и металлы номинальный (выраженный в долларах по текущим ценам) торговый баланс увеличивался с 2002 по 2006 г. В прошлом году этот показатель немного снизился, но из-за скачка нефтяных цен в этом году он снова вырастет. Тем не менее, даже если цена на нефть стабилизируется на нынешнем уровне, торговый баланс неизбежно начнет снижаться. А за ним последует и сальдо текущих операций, чему будут немало способствовать растущие затраты на обслуживание внешнего корпоративного долга.

На первый взгляд внешний дефицит в 2% ВВП не кажется чрезмерным. Для сравнения, в прошлом году такой или даже больший дефицит имели 105 стран. Однако более детальный анализ показывает, что это могут позволить себе либо развитые страны с хорошим инвестиционным климатом вроде США, Великобритании, Испании, Италии, Австралии, либо небольшие развивающиеся страны, которым для покрытия дефицита в среднем достаточно $2,5 млрд.

Россия же относится к группе больших развивающихся стран: уже сегодня 2% ВВП составляет $35 млрд, а к 2018—2020 гг., по оценкам МЭРТ, эта сумма вырастет до $100 млрд. Попытка получить приток капитала в таких объемах означает конкуренцию именно с развитыми странами, которые по сравнению с Россией обладают несомненными преимуществами – высоким качеством общественных институтов и надежной защитой прав инвесторов.

Тем временем предложение на мировом рынке капитала может снизиться. Ведь любая страна способна кредитовать остальной мир лишь в пределах суммы собственного положительного сальдо по счету текущих операций. А если цены на нефть стабилизируются или начнут снижаться, сальдо счета текущих операций будет уменьшаться и в других странах-экспортерах топлива. Это еще один аргумент против того, что России будет в состоянии в течение длительного времени финансировать столь большой дефицит.

Что это значит для российской экономики? Очевидно, давление на валютный рынок возрастет, и Банк России будет вынужден отойти от нынешней политики таргетирования рубля против корзины валют. Курс рубля будет отпущен в свободное плавание и, по нашим прогнозам, может девальвироваться на 3-4% в номинальном выражении. Этого достаточно, чтобы реальный рубль стабилизировался. Банк России потеряет контроль над рублем, зато приобретет больше влияния в денежно-кредитной политике: его роль как кредитора последней инстанции значительно возрастет.

Источник: Антон Струченевский,

старший экономист ИК «Тройка Диалог»,

Smart Money, 21 апреля 2008 г.

Lesson 27
Foreign Exchange Market

Read and translate the text and learn terms from the Essential Vocabulary.

What is FOREX?

FOREX (FOReign EXchange market) is an international foreign exchange market, where money is sold and bought freely. FOREX was launched in the 1970s, when free exchange rates were introduced.

Only market participants determine the price of one currency against the other proceeding from supply and demand. As far as the freedom from any external control and free competition are concerned, FOREX is a perfect market. It is also the biggest liquid financial market. Money masses in the market constitute from 1 to 1.5 trillion US dollars a day. Transactions are conducted all over the world via telecommunications 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday.

FOREX is an objective market, because if some of its participants would like to change prices they would have to operate with tens of billions dollars. That is why any influence by a single participant in the market is practically out of the question. The superior liquidity allows the traders to open and/or close positions within a few seconds. The time of keeping a position is arbitrary and has no limits: from several seconds to many years. Although the daily fluctuations of currencies are rather insignificant, you may use the credit lines, that are accessible even to currency speculators with small capitals ($1,000—5,000), where the profit may be impressive.

The idea of marginal trading or leverage trading stems from the fact that in FOREX speculative interests can be satisfied without a real money supply by using trading with a margin deposit. This decreases overhead expenses for transferring money and gives an opportunity to open positions with a small account in US dollars, buying and selling a lot of other currencies. In marginal trading, each transaction has two obligatory stages: buying (selling) of currency at one price (opening the position), and then selling (buying) it at another (or at the same) price (closing the position).

Opening a position, a trader furnishes a deposit sum from 0.5 to 4 % of the credit line granted for the transaction. So, in order to buy or sell USD 100,000 for Japanese yens, you will not need the whole sum, but only from USD 500 to 2000 depending on your policy of controlling risks. When the position is closed, the deposit sum returns, and calculation of profits or losses is done. Marginal trading in an exchange market uses lots. 1 lot equals approximately $100,000, but to open it, it is necessary to have only from 0.5% to 4% of the sum.

For example, you have analyzed the situation in the market and come to the conclusion that the pound will go up against the dollar. You open 1 lot for buying the pound (GBP) with the margin 1% (1:1000 leverage) at the price of 1.49889 and wait for the exchange rate to go up. Some time later your expectations become true. You close the position at 1.5050 and earn 61 pips (about $405).

The major currencies traded in FOREX, are Euro (EUR), Japanese yen (JPY), British Pound (GBP), and Swiss Franc (CHF). All of them are traded against the USD.

While trading you can fix your profit or cut off your losses according to the orders Limit and Stop. Limit is set up higher than the current meaning of the price. Stop is set up lower than the current meaning of the price. With these commands the positions are closed without additional orders when the price reaches the agreed level.

In order to assess the situation in the market a trader has to be able to use fundamental and/or technical analysis, as well as to make decisions in the constantly changing current of political and economic information. Most small and medium players in financial markets use technical analysis. Technical analysis presupposes that all the information about the market and its further fluctuations is contained in the price chain. Any factor, that has some influence on the price, be it economic, political or psychological, has already been considered by the market and included in the price.

Technical analysis is a statistical and mathematical analysis of previous quotes and a prognosis of coming prices. A number of technical indicators have been installed into the PRO-CHARTS trading system. Analyzing the indicators one can come to the conclusion about further movements of the quoted currencies.

Fundamental analysis is an analysis of current situations in the country of the currency, such as its economy, political events, and rumors. The country’s economy depends on the rate of inflation and unemployment, on the interest rate of its Central Bank, and on tax policy. Political stability also influences the exchange rate.

At the same time one should not consider fundamental analysis just as an analysis of the economic situation in the country itself. A far bigger role in the FOREX market belongs to the expectations of the market participants.

Various prognoses and bulletins, issued by the participants, have a strong influence on the expectations. Very often an effect of the so-called self-fulfilling prophecy occurs when market players raise or lower the exchange rates according to the prognosis. But a deep and thorough fundamental analysis is available only for big banks with a staff of professional analysts and constant access to a wide field of information.

Reading a foreign exchange quote may seem a bit confusing at first. However, it’s really quite simple if you remember two things: 1) The currency listed first is the base currency and 2) the value of the base currency is always 1.

The USD is the centerpiece of the Forex market and is normally considered the ‘base’ currency for quotes. In the «Majors», this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote increases to 113.01, the dollar is stronger as it will now buy more yen than before.

The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.7366, meaning that one British pound equals 1.7366 U.S. dollars. In these three currency pairs, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, Euro or Australian dollar.

Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.

When trading forex you will often see a two-sided quote, consisting of a ‘bid’ and ‘offer’. The ‘bid’ is the price at which you can sell the base currency (at the same time buying the counter currency). The ‘ask’ is the price at which you can buy the base currency (at the same time selling the counter currency).

Foreign exchange quotes are a relation between currencies.

USDJPY – the cost of $1 in Japanese yens.

EURUSD – the cost of Euro 1 in US dollars.

That is, quotes are expressed in the units of the second currency for a unit of the first one. For example, quote USDJPY 108,91 shows that $1 costs 108,91 Japanese yens. Quote EURUSD 0.9561 shows that 1 Euro costs 0.9561 US dollars.

The last figure in the quote is called «pip». The cost of the pip is different for every currency, and depends on the leverage and current quote.

GBPUSD and EURUSD are direct quotes, i.e. when the chart goes up, GBP and EUR become more expensive, and when it goes down, the currencies become cheaper. USDCHF and USDJPY are backward quotes, and when the chart grows, prices on CHF and JPY fall, and when the chart goes down, the prices grow.

On direct quotes you buy according to ASK and sell according to BID. With backward quotes, you buy according to BID and sell according to ASK.

Participants of a Foreign Exchange Market

Commercial banksconduct the main volume of exchange transactions. Other participants of the market have their accounts at the banks, conducting necessary conversion transactions. Banks accumulate the combined needs of the market in exchange conversions as well as in calling and distributing money, breaking with it into new banks. Besides satisfying clients’ requests, banks can operate independently, using their own assets. A forex market is a market of interbank dealings, and one should bear in mind the existence of an interbank foreign exchange market. In international forex markets, international banks with the daily volume of transactions of billions dollars have the biggest influence. These are Barclays Bank, Citibank, Chase Manhattan Bank, Deutsche Bank, Swiss Bank Corporation, Union Bank of Switzerland, etc.

Exchange markets. Exchange markets do not work in a definite building and they do not have definite business hours. Thanks to the development of telecommunications most of the leading financial institutions of the world use services of exchange markets directly and via mediators 24 hours a day. The biggest international exchange markets are based in London, New York and Tokyo. In some transitional economies there are exchange markets for currency exchange by juristic persons and for forming a market exchange rate. The state usually regulates the exchange rate in an active manner, using the compactness of the exchange market.

Central banks control currency reserves, realize interventions, and regulate the interest rate in the national currency. The central bank of the U.S., the US Federal Reserve Bank, or «FED», has the greatest influence in the international exchange markets. It is followed by the central banks of Germany (the Deutsche Bundesbank or BUBA) and of Great Britain (the Bank of England, nicknamed the «Old Lady»).

Firms that conduct foreign trade transactions. Companies participating in international trade have a stable demand for foreign currency (importers) and supply (exporters). These organizations do not have direct access to exchange markets, and they conduct their conversion and deposit transactions via commercial banks.

Investment funds represented by various international investment, pension, and mutual funds, insurance companies, and trusts, realize the policy of diversified portfolio management by placing their money in government or corporate securities. The fund Quantum owned by George Soros executes successful exchange speculations. Big MNCs, such as Xerox, Nestle, GM that make FDI, also are firms of this kind.

Broker companies bring together a buyer and a seller of foreign currency and conduct a conversion dealing between them for a broker’s fee. In the forex market there is no fee as a percent from the sum of a transaction, or as a sum agreed in advance. Usually broker companies quote currency with a spread, which includes their fee. A broker company is a place where the real exchange rate is formed according to closed deals. The biggest international broker companies are Lasser Marshall, Harlow Butler, Tullett and Tokio, Coutts, and Tradition.

Private persons. Natural persons realize a wide range of non-commercial transactions in the sphere of foreign tourism, transfers of salaries, pensions, royalties, buying and selling foreign currency.

Source: www.pro.forex.com