This chapter presents the different related literature and studies essential to the objectives of this study. Cheek (n. D), Foreign Exchange Market is those which are involve in the transaction f the business in merchandise in international between themselves. It is mostly used in local banks to trade domestic currency for the value of foreign currency. The bank will describe the amount of currency to be given to clients for them to receive competing international banknotes.
Picador (2014), states that, it has no specific appearance of a marketplace. Instead, it is a communication network between business firms in international. It can be a big help in the industry in the future. Economy probably rises and as well relationship with other countries would do well. Investment of imported products or foreign currencies can aid investors to analyze their suggested price. Also, Picador (2014) explains that devaluation and revaluation are recognized as one-time events but consists of changes wherein it occurs occasional.
Currency depreciation and appreciation which are triggered by market force are those floating exchanges rate system which are involve in the changes in the levels of currencies which changes continuously. Currency rates affect the imports and exports in terms Frye (2001), the initial period after devaluation, the imports became more expensive while exports stay stagnant, where it leaves to a larger current account deficit. The domestic currency of the lower value results in imported and cost much more, where it leads to “imported” inflation.
The devaluation has a big effect on the economy because through this the import and export of goods may change. The import becomes much more expensive and export may have lower value and this makes the lower domestic currency exports become more competitive in global markets, while the entrepreneurs will have expensive imports and may lead to an improvement in the current account deficit. Brown (2008), states that financial markets are concerned in the institutions and procedures that are in large for the merchandising in all classes of financial claims.
It used to facilitate the allocation of those who are involved in a business transaction. This is also the connection between the supplier and the entrepreneur and can be classified as money and capital markets. Cheek (n. D) explains that Primary Market is used when corporation and government offer securities for the first time to potential investors. This statement is indeed deals to the investors where their financial assets are sold first by the originators.
Investors would agree because there are only two persons who are involved. The advantage of this Primary Market is that it can easily sell it up directly. It is good because transaction of selling would be easy. Also, Cheek (n. D) states that secondary markets are those markets whose function is for merchandising debts and equity securities which is being sold to the primary markets or in other words, they manage the reselling or reburying of debt and equity securities.
The public offerings function is to share both individuals and institutional investors through managing the investment in some banking firm and its underwriting syndicate which is the one resells them to the public at a higher amount. Josh (2001), explains that secondary market are money market that is generally very liquid; that the securities can be turned into cash quickly without the need to reduce the price significantly and transactions costs are low. Secondary Market in money market are very negotiable; that is the securities can turned into cash easily without the need to lessen the price significantly and transaction costs are low.
Coacher (201 1), treasury bills are issued through a competitive bidding process at discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder. Using treasury bills, it can be a big help specially in having a discount from buying. Through treasury bills also it makes the bonds, certificates of deposit and money market fund to become exceptionally safe in all aspects in terms on paying or saving negotiable tools. Coacher (201 1), cash is legal tender or coins that can be used in exchange goods, debts or services.
Cash is a medium of exchange. Without it people cannot buy whatever they want. They cannot rendered a service to the clients without any payments or exchange of cash. The term payment or less than a year payments. Money markets handle and provide trading of short term debt instruments issued by firms who have high credit rating. James (1987), money markets are much better alternative in many circumstances. They provide higher rates of return for those with surplus cash, with a wide variety of instruments to suit the preferences of the lender. Money markets are much better way in many challenges.
It can provide higher rates of return for surplus cash, with a rage variety of instruments to suit the preferences of the lender. Howard (1999), holding an asset for an extended period of time. The media frequently advices people to “invest for the long term”, but determining whether or not an investment is long term is very subjective. Long term is an asset for an extended period of time. It is very subjective, it can held for as little as one year or for as long as 30 years or more. Howard (1999), Short term is the determination can be very important for taxes.
Assets held short-term are generally taxed at a higher rate than assets held for more than a year. It is an obligation to pay on a short-term period of time. It takes a month or a year contract containing the face value of bond. James (1997), market makers maintain an inventory of securities and advertise prices. By providing the middleman services they assist the players in the market to quickly find counterparts to trade and to enhance liquidity. Some of the conducted trades or private deals are conducted through a central clearing house and settles the deal by debiting the account of the buyer and credits the account of the seller.
Market makers exist all over the world as a means of facilitating the business. With these instruments of the market makers large amounts can be traded over the telephone where it can be completed by the brokers and traders. With these it can enhance the trading in another country where it can be more possible that by trading more it can get. James (1997), peso appreciation gives benefit on our economy. It resulted from foreign debt servicing but gives negative beneficial to the remittances given by the OFF. Philippines exchange rate is converted in term of a dollar too unit too peso.
There are two systems used to calculate exchange rates, first one is the free floating exchange rate and the fixed exchange rate given by Bangkok Central Eng Philippians. Brown (2008), an exchange rate is the exchanging of currencies in a certain country’s currency to another country under foreign exchange market. The exchange rate is most readily understood in the trade of currency in the country. It is use for the conversion and to export the goods to invoice to the purchaser in foreign currency. Brown (2008), forward exchange trading ‘ change of currency, does not grow fast, but there is a settled date in the future for exchanging of rate.
It is also related to the award rate which deals with exchange rate contract. It is also connect to margin that deals about the difference between the spot rate and forward rate. Brown (2008), exchange rate agreed wills this transaction occurred in foreign exchange markets which was called the “Foreign exchange swaps” which differ between the two “legs” transactions while the first “leg” is a spot transaction. With this transaction, people can easily forward transactions into another transaction. But forward the transaction, and agree back the another transaction.
Coacher (201 1), exchange rate play such an important role in country ‘s competitiveness level, currency exchange rates are among the most analyzed and forecasted indicators in the world. The exchange rate is determined by the level of supply and demand on the international markets. With this exchange rate people will have an idea regards the changing of value of the currencies. It will help to easily determine the level of the supply and demand on the international markets. Smith (201 1), foreign exchange market is a worldwide decentralized over-the-counter financial market for the trading of currencies.
The value of any particular currency is determined by the market forces based on the trade investment, tourism, and ego-political risks. Currency exchange is one kind of the demand factors for a particular currency. The factor of demand occurs when a foreign company seeks to do business with a company in a specific country. Usually, the foreign company pays the local company in their local currency and the impact of this to strengthen the currency of a specific country.