After equipping yourself with the know-hows of Foreign Exchange, the natural next step is to explore how it can work for you.
1. Know the basic terms in foreign exchange
Before starting to do a foreign exchange trade, it is suggested to know the basic terminology in foreign exchange such as base currency, bid price and asking price and also spread, etc.
2. Start with small investments
No matter what kind of investment, the biggest risk in the market is to invest a large amount of money at one time, exposing yourself to a greater risk envi- ronment. Therefore we suggest you start with small amounts, increasing trad- ing amounts gradually and only after conﬁrming that the strategy you're using is correct.
3. Learn more, ask more, and prepare more
For most investors, foreign exchange transaction may be a relatively simple tool among many investments. But it is still necessary to understand the basics, its risk management, and terminology. You still need to do a lot of preparation, or ﬁnd a professional investment team, such as DBS's team of Treasury Specialists, who will be of great help to your own investment planning and proﬁt-making.
Upon understanding the above, are you excited about "foreign exchange transaction"? Before you get started, we recommend you learn about global currency exchange rates. Get exchange rate information from DBS. As the saying goes, keep your friends close and your enemies closer. A more thor- ough understanding in exchange rate will make it relatively easy to conduct foreign exchange transactions!
When conducting foreign exchange transactions, in addition to knowing global currency exchange rates, you will also need to know what will aﬀect the ex- change rates to better understand the foreign exchange markets:
A currency's biggest threat is inﬂation, which can greatly aﬀect the exchange rate. When the inﬂation rate is relatively low, the price of various goods and services in the country rises slowly, thereby increasing the value of the curren- cy; By contrast, countries with higher inﬂation, tend to devalue their currencies and have higher interest rates.
2. Interest rate
Changes in interest rates will aﬀect the value of currencies. From the previous point, we can see that foreign currency exchange rates, inﬂation, and interest rates are closely related. When interest rates rise in a country, it means that the currency will also rise, making people in other countries more willing to invest, so of course the exchange rate will rise as well.
3. Speculative trading
Of course, in the foreign exchange market, in addition to the participation of banks and non-bank ﬁnancial institutions in the market, the operations of many professional investors or market speculators will also aﬀect the currency exchange rate. As demand increases and the currency appreciates, the ex- change rate will also rise.
In fact, in addition to the above points, there are many factors that will aﬀect the exchange rate changes of various countries, such as the global and region- al economies, trade, political stability, and national government debt. For ex- ample, the US-China relations , the yield of US Treasury, etc., which all have diﬀerent degrees of direct or indirect eﬀects on foreign exchange transactions and exchange rates with various currencies. Therefore, ﬁnancial planning and risk assessment should be done before transactions, and transactions should be conducted reasonably and prudently.
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Risk Disclosure and Important Notice
Foreign exchange involves risks. Customers should note that foreign exchange may incur loss due to the fluctuation of exchange rate.
RMB currently may not be freely convertible and is subject to exchange controls and restrictions. There is no guarantee that RMB will not depreciate. If you convert Hong Kong Dollar or any other currency into RMB so as to invest in a RMB product and subsequently convert the RMB sale proceeds back into Hong Kong Dollar or any other currency, you may suffer a loss if RMB depreciates against Hong Kong Dollar or other currency.
The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.
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