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Forex

Raghav (student) (28 Points)

17 September 2013

Margin of bank for forex tranj. Let 8% on buyng n 10% on sellng ... Customr wnt to sell $ to bank so 1st of all bank enter into cover tranj with marlet let 1$=60 n then cot rate for customr by deductng margin ..... So my Q is which margin rate shall be apply on 60.. Means bank ki margin rate kese lgti h.... Buyng kb lgti h n sellng kb?? Plz aap CONCEPT btana formula nhi

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ABHINANDAN JAIN (CA Student) (886 Points)
Replied 18 September 2013

For Specifically Exchange Margin in Forex, Think from Bank's point of View..u know they anyone always want to sell any commodity at higher rate and purchase at cheaper rate...same concept applies..Practically in current market scenario bank quotes two rate in Bid/Ask form..ie. Bid is the Buying rate (always kept in L.H.S) and Ask rate is the selling rate ( both from banks's view). So for thinking ex.Margin whether to Add or Less..wht is the transaction is gng to happen..If u as a customer want to sell..that means bank is buying and they prefer less rate..so whatever be the Bid rate,Margin is to be deducted with that Bid Price.

In your case assuming $1 = 60 be the buying rate for bank (i.e. Selling rate for customer), 8% (i.e. Buying Commision) = 8% on 60 is to be deducted with 60 which equals to 57.2 per Dollar. In your ques, bank will quote $1 = 57.2.

Hope it will clear ur doubt..still if u hv any confusion,pls leave ur doubt..

regards