Currency risks are a part of risks of loss to which participants of the international economic relations are subject. The currency risk is a risk of losses at foreign exchange purchase-sale at different rates. The currency risk, or risk of losses in prices, is bound to internationalisation of the market of bank transactions, creation of the transnational (joint) enterprises and banking establishments and diversifikatsiej their activity and represents possibility of monetary losses as a result of fluctuations of rates of exchange.
Thus alteration in rates of currencies under the relation to each other occurs owing to numerous factors, for example: in connection with change of an inherent worth of currencies, to constants perelivom cash flows from the country in the country, gamble etc. the Key factor characterising any currency is trust degree to currency of residents and non-residents. Trust to currency the difficult multifactorial criterion consisting of several indicators, for example: a trust indicator to a political regimen of degree of an openness of the country, liberalisation of economy and a regimen of the exchange rate, export-import balance of the country, base macroeconomic indicators and beliefs of investors in stability of development of the country in the future. However, actually, the given assertion concerns only certain type of an adjustable ped, namely to free - to a floating rate. As of today in world practice there are some types of regimens of rates of exchange depending on specificity of each concrete country. With a known share of convention the currency system type can be defined conditionally under some characteristics: 1) the Type of the country with a closed market has following characteristics: the tendency to closeness of economy and the economic information, rigid restrictions for investors and export-import transactions, mainly state form of economy, the directive form of definition of an adjustable ped. The exchange rate of such country is unpredictable, investors and importers usually aspire to avoid bargains in such currency, real accounts on trade turnover are made in the third-country currency. The market of similar currencies is usually very narrow (or does not exist at all). Macroeconomic indicators directly do not influence a rate of such currencies in the world market. 2) the Countries with a fixed rate priority at significant economic potential. Usually exchange of such countries are rigidly fixed in relation to "authoritative" currency and is approaching for realisation of export-import transactions and investments. Macroeconomic indicators usually do not influence or very weakly influence a rate of national currency of such countries. 3) There is also very numerous circle of the countries with rather free but not stable economy, the exchange of such countries is difficultly prognosticated and can depend on random factors: political instability, unpredictable economic policy of the government, international nekonkurentnosposobnosti, a raw orientation of economy, inflationary financing of deficiency of the state budget, insufficiency of level of external reserves, including from macroeconomic indicators. Investment in similar currency usually risky action and importers are inclined to use the third-country currency in accounts on trade turnover with such countries. Macroeconomic indicators in such countries influence a rate of national currency, however can and is artificial to restrain the government on political grounds. 4) the Countries with the stable economy, adhering to a priority of free swimming of the native currency. The major characteristic of such countries: the developed market economy, economic well-being, the predicted policy of the government, the rigid control of a monetary stock, interest rates and inflation in the country. Declared freedom of swimming of such currency, however, in some cases is bound to dirty methods of adjustment of a rate - with interventions, interstate governmental agreements of joint swimming of rates, political pressure. Investments into the given currencies are less risky, export-import transactions are usually made with use of these currencies. The exchange sensitively reacts to change of macroeconomic indicators of economy in such countries. Macroeconomic and political factors usually very flexibly react only to 3rd and 4th type of currency. Thus many patterns which influence a rate in long-term and short-term prospect can be traced. For example, in long-term prospect usually at the analysis of movement of rates of exchange consider such factors as, gross national product level, rates of inflation, a status payment and a balance of trade, a rate of unemployment, public debt level, development economic outlook, level political and social peace etc. At the same time, from all factors influencing a rate in long-term prospect, with economists it is allocated two cores. The first of them a rate of inflation, observable which pattern is that in the country with higher rates of inflation the rate of national currency in relation to currencies of the countries with lower rate of inflation goes down. So exchange of the countries with high rates of inflation, such as, for example, the Great Britain, Italy, France, the USA and Canada - went down, while exchange of low-inflation countries - such as, for example, Japan, Belgium, the Netherlands, Germany and Switzerland - were increased. Such is a long-term trend in dynamics of rates and the prices on a time interval of an order of two tens years. Swings over of exchange can be bound the reasons, both economic and political, and purely speculative. The market sensitively reacts to all changes of economic indicators, forecasts of experts, political crises and political hearings, using the slightest occasion to start the speculative game promising the good income to speculators. Besides, it is necessary to tell, that not only the countries where actually there are changes, are subject to risk of difficultly prognosticated fluctuations of their currencies, but it also concerns the countries adjoining to the crisis countries, or having with them significant economic or political connections. The currency market is always characterised by the instability and unpredictability. It speaks extraordinary fast reaction of participants of the currency market to political and economic changes in the world, and also can be largely bound to gamble. The currency risk is the risk of losses caused by adverse alteration in rates of foreign exchanges during realisation of bargains on their purchase and sale. It arises only in the presence of an open position. Currency transactions usually section on "cash" and "urgent". The market of cash purchases requires payment in a current of two working days from the date of a conclusion of a contract, therefore default from obligations is less probable. Such bargains concern: the bargain the SWAP, overnajt. Forward contracts concern: the forward, the SWAP, futures, options. The risk of non-payment on urgent currency transactions depends on credit status of the investor and contract term. The above this term, the above probability of a course change and non-payment. Urgent instruments are applied by bank customers, as the basic methods of insurance of their (hedging) currency (or financial) risks. Banks are compelled to apply these instruments, as services to clients. At the same time the risk of urgent operations is serious enough also bank, in turn, is compelled to insure itself prisoners with the client forward contracts. To urgent kinds of bargains carry forward transactions; the SWAP; options; futures. 1) the Forward. Such bargain at which the rate is established in the present is called as a transaction for forward delivery, and currency swap occurs in the future. Characteristics: • Currency swap (account) will occur not earlier than in 2 working days after a conclusion of a contract, • The future rate of exchange as is fixed at conclusion of the transaction, • Date of maturity is fixed in the contract • There is no question on liquidity before maturity payment If there is a real possibility of occurrence of currency risk in the future, it is covered with a transaction for forward delivery. The bank opens a forward item in case the client sells or purchases a foreign exchange on the forward, i.e. with a currency exchange for the future fixed date, and also if the bank sells or purchases a foreign exchange on the forward with the purposes of profit extraction. However here there is a risk of change of the prices which can lead to bank losses. 2) THE SWAP. The bargain the SWAP means an exchange of one currency for other for the certain period of time. Represents a combination of cash operation - the SPOT and urgent - the forward. Both bargains consist in one and too time with the same partner. The SWAP is used as an agent of an exception of risk of interest rates, and also, as an agent of an exception of risk of fluctuation of rates of exchange.
3) Optional operations The option is an agreement between the buyer and the seller which represents to the buyer the right - but not the obligation - to purchase currency from the vendor of option or to sell it. The option is one of variants of full cover of currency risks. It can be used as the insurance using at adverse movements of a rate. In comparison with the forward, the option gives the best protection against possible risks because the buyer of option reserves the right a choice of realisation or bargain failure. 4) Futures. Trading in futures consist at special exchanges and, unlike the forward contract, the future does not provide real currency purchase/sale. The item under the future is liquidated by means of counter contracts. The risk under futures is minimised at the expense of possibility to cover the obligation under the first futures contract by realisation of the counter return bargain. The essence of the basic methods spotovogo and urgent insurance is reduced carrying out currency-metabolic operations before there will be an adverse course change, or to compensate losses from similar change at the expense of parallel deals with the currency which rate is changed in an opposite direction. Currency risks can be structured as follows: The credit risk - the risk caused by unwillingness or impossibility of the client or the counterpartner to settle up under the obligations Conversion risk - risks of currency losses immediately on concrete operations.
