4). Free float regime

Country with a stable economy, stick to the priority of free floating currency. The most important characteristic of these countries developed market economy, the economic well-being, predictable government policies, and strict control of the money supply, interest rates and inflation in the country. Declared freedom of navigation of such currency, however, in some cases linked to dirty methods of regulation of the course - with interventions, the Inter-Governmental agreements joint navigation courses, political pressure.

Investments in these currencies are less risky; export-import operations are usually made using these particular currencies. Exchange rate is very sensitive to changes in the macroeconomic indicator in these countries. Macro-economic and political factors are usually very flexible in responding only to the 3rd and 4th type of currency. This may be traced many laws that affect the course of the long and short term. For example, in the long term, usually in the analysis of movements in exchange rates take into account the factors such as:

• GDP,

• Inflation

• The state of the balance of payments and trade

• The level of unemployment

• The level of public debt

• The economic prospects of the level of political and social stability, and so on.

1. В.Ф. Гарбузов «Финансовый кредитный словарь» – Москва.: Финансы и статистика, 1984.

1.3.6 Factors, that effect to foreign exchange

However, of all the factors influencing the course of the long-perspective, there are two major economists.

The first of them, the rate of inflation, observed patterns of which is the fact that in a country with high rates of inflation decreases the rate of national currency against the currencies of countries with a low rate of inflation. So currencies of countries with high rates of inflation, such as, for example, the UK, USA and Canada - went down. Whereas currencies of countries with low rates of inflation - such as, for example, Japan, Australia and Switzerland - have risen. Such is the long-term trend in rates and prices in the time interval about two decades.

The sharp fluctuations in exchange rates may be related reasons, such as economic and political, as well as purely speculative. The market is very sensitive to any changes in economic indicators, forecasts of experts, political crises and political rumors, using the slightest excuse to start a speculative game that promises good returns to speculators.

       In addition, it must be said that not only the country where the actual changes occur, it is difficult to forecast risk of fluctuations of their currencies, but it is also refer one of the countries which neighboring the crisis countries, or having with them significant economic or political ties.

1.3.7 Foreign exchange transactions

Foreign exchange market is always characterized by its instability and unpredictability. This is due to an unusually fast response of foreign exchange market to political and economic changes in the world and also to a large extent can be attributed to speculation.

Foreign exchange risk - the risk of loss caused by adverse changes in foreign exchange rates during the execution of transactions on their buy - sale. It occurs only in an open position. Foreign exchange transactions are usually divided into "cash" and " forward transactions ".

The cash transaction - conversion deal, that calculation that must be implemented by the parties, but not later than two working days after its conclusion. The settlement date of the transaction is called value date. There are three types of cash transactions: today (value date coincides with the date of the transaction), tomorrow, spot (calculations "the day after tomorrow").

Forward - transaction, in which settlement exceed two working days following its conclusion. At the present time the global foreign exchange market is characterized by a wide variety time bargain instruments on the domestic currency market used simpler versions time bargain instruments. However, we can identify the main most famous time bargain instruments: currency forwards, futures, options, swaps.

By the Forward types of transactions are forward transactions, Swap, options, futures.