Swap deal in forex market

China’s Central Bank said on Thursday that it has inked a currency swap agreement with Nigeria. The move is aimed at facilitating bilateral trade and investment and promoting swap deal in forex market financial stability of both sides, the PBOC said.

The deal can be extended by mutual consent. A currency swap deal allows two institutions to exchange payments in one currency for equivalent amounts in the other to facilitate bilateral trade settlements and provide liquidity support to financial markets. In 2014, the CBN’s deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from two per cent to seven per cent. According to him, 85 per cent of its foreign reserves were in dollars and it needed to have more in Chinese Yuan, as the country was taking a more important place in global trade.

It was clear to us that the future of international economics and trade will shift in large part to business with and by China. China, as well as providing a fertile ground for demand for the currency on the continent. This market determines the foreign exchange rate. The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends.

The foreign exchange market works through financial institutions, and operates on several levels. Behind the scenes, banks turn to a smaller number of financial firms known as “dealers”, who are involved in large quantities of foreign exchange trading. The foreign exchange market assists international trade and investments by enabling currency conversion. In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying with some quantity of another currency. The modern foreign exchange market began forming during the 1970s. This followed three decades of government restrictions on foreign exchange transactions under the Bretton Woods system of monetary management, which set out the rules for commercial and financial relations among the world’s major industrial states after World War II. 24 hours a day except weekends, i.

As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. 09 trillion per day in April 2016. Currency trading and exchange first occurred in ancient times. During the 4th century AD, the Byzantine government kept a monopoly on the exchange of currency. Currency and exchange were important elements of trade in the ancient world, enabling people to buy and sell items like food, pottery and raw materials. If a Greek coin held more gold than an Egyptian coin due to its size or content, then a merchant could barter fewer Greek gold coins for more Egyptian ones, or for more material goods. During the 15th century, the Medici family were required to open banks at foreign locations in order to exchange currencies to act on behalf of textile merchants.