financial market

Executive summaryThis is a financial report about rate. This report analysis the rate between AUD/USD and AUD/EUR. By analyzing the exchange rate and inflate rate, know about the market and so as to catch the opportunity to develop the bank.Firstly, this report analyzing the market of Australia, USA and the UK. The Australia has cut the interest rate from 2.25% to 2%, and Australia’s dollars is less value then before. The inflate rate in Australia lower than before but higher than the USA and UK. And the AUD/USD rate is reducing since may, 2015. As for the USA, the inflate rate is low and the inflate rate is stable. As for the UK, the inflate is very low and even under zero, while the rate between AUD and EUR is high and the it is growing.Secondly, according to the situation, there are some theories suit for the bank financial development. Such as triangular arbitrage and currency analysis.Thirdly, this report analyzed the reasons for we failed.IntroductionOur factory is an corporate which names AMCOR, now we have AUD from the sales of 90 day bank bills having a face value of 950 million and yield of 3 percent. Our primary task is :1. Raise USD 350 million to pay for an equipment purchase, 2. Raise EUR 250 million to pay for buy raw materials from TurkeyOur secondary task is speculate in the FX market, which means we must set up a speculate strategy based on ourselves outlook on the exchange rate movement over the next 6 months, by now we have an equipment of 500 million AUD available for our speculation. The plan what we made is 1. Use all AUD to buy EUR to achieve primary task no.1. And then use rest of EUR to buy USD. After achieve primary task. We need speculate to FX market, at that time we supposed that AUD will keep decrease in the FX market. So we want use AUD to buy more foreign currency such as USD or EUR as soon as possible.Market viewThe Reserve Bank Australia (RBA) has cut interest rates from 2.25% to 2%. (RBA,2015) Considering the weak inflation growth, the Australia central bank may continue cutting the interest rate to stimulate the sluggish economy in the future. At the same time, according to BBC lasted news,The US central bank has decided not to raise interest rates, keeping them at the same level-0.25% that they have been at since December 2008. (BBC, 2015) Therefore, the Australia interest rate would fall and the US interest rate remains relatively stable in next few months. Follow this trend, the investors in the USA would not be expected to place more cash in investment in Australia, which discourages the capital inflow. The demand of AUD will decrease and the demand curve will shift to the left. The Australia investors would also like to put their funds in investment in other high-interest rate countries to obtain a higher return, which encourages the capital outflow. The supply of AUD will increase and the supply curve will shift to the right. Hence, it could be forecast that there would be a depreciation of the AUD against USD.(Figure 1.1)The inflation rate in Australia was recorded at 1.50 percent in the second quarter of 2015, which increase 0.2%. (RBA, 2015) Because of the RBA policy of reducing interest rate, the Australia inflation rate would keep increasing in the next few months. Although the inflation rate in USA is also in an upward trend, Australia inflation grows faster than that in the USA. The price of goods and services manufactured in Australia will increase which cause the demand for exports in Australia decrease and demand for AUD decrease. At the same time, the demand for import in Australia will increase and the supply of AUD will increase. It is likely that the AUD would depreciate against the USD in the coming months.(Figure 1.2)The exchange rate of AUD against USD reduced from 0.8127 to 0.7370 at sinceJanuary to August 2015. At 15th September, Malcolm Turnbull replaced Tony Abbott as Australian new prime minister, which made the currency traded at US71.14 cents, up from US70.90 cents at the day before. (The Australia, 2015) The new prime minister’s came in makes the consumers and investors become more confident about the Australian economy. The expectations of appreciation increase which encourages the speculators to buy more AUD. Consequently, it is could be forecasted that the AUD would appreciate against USD in short-term. In general, the AUD is expected to keep depreciating against USD in the next six months, showed as Figure 1.3.(Figure 1.3)AUD/EUR market viewBloomberg economists generally predict that when the September quarter of the data in today's announcement, the inflation rate will fall 2.3%. Despite the National Bank's senior economist Spiro think prices will be at a standstill in this period, but this still reflects their expectations for the quarter price rose 0.4%.On the other hand, Spiro also said that because the carbon pricing will lead to price increases, the Reserve Bank past any price decline may be related to the removal of carbon tax(Hazenberg, R., Seddon, F., & Denny, S. 2015)Since the European Central Bank announced the decision that it would cut the benchmark interest rate, the Australian dollar against the euro overnight rose to the highest in 15 months, high rebound to 72.44 euro cent, starting from Thursday it increased nearly 2%. In early trading, the Australian dollar against the euro exchange rate was about 72.21. In addition, driven by the European Central Bank unexpectedly cut interest rates, the Australian dollar against the US dollar rose to above 93.90 cents, but soon fell to around 93.50 cents.The rate between AUD and EUR in 2015According to the Australian Bureau of statistics data, Australia over the past year (at the end of march) the inflation rate was 1.3%, a record low of nearly three years. The inflation level is lower than the 2% to 3% inflation target set by the central bank. Data also show that in the first quarter of this year, the Australian fuel prices fell by 12.2%, but the higher education sector prices rose 5.7%, the medical service industry prices rose 2.2%. According to Australia recently released data show that due to the abolition of the carbon tax, the Australian year of inflation is expected to fall sharply. Australia's annual inflation rate is currently 3%, at the top of the Reserve Bank comfort zone. Official data show that in February, the UK inflation rate was low, it was 0%( Brown, A., & Swersky, A. 2015). According to Broadcasting British Corporation, in January 0.3% of inflation was the lowest recorded since 1988, the low price of food and computer products has played a role in adding fuel to the flames. Many analysts had predicted that the inflation rate in February was 0.1%. Last month, the Bank of England has said that this spring the inflation rate is likely to be short and low. Figures from the National Bureau of statistics also show that the retail price index (RPI) inflation rate fell from 1.1% to 1%.Gold price is getting down, the Australian dollar began to fall ahead of other commodities currencies. Early last week, the United States, the number people require for lost job consumption was 817.30, after the low point of 798.10, has rebounded to 804.00/50. Oil prices fell $1.8 to 107.55. Macro fund account to continue to focus on the Australian deterioration of the basic message: trade deficit again in early trading, the first week of the Australian Reserve Bank of moderate interest rate resolution, etc.. The world economic slowdown has suppressed the prospects for the mid market. Australian industry group and the Australian housing industry association released survey data show that in August, Australia's construction activity slowed down, due to the first time in August commercial rise. Australia August AIG construction performance index rose from 41.6 in July to 43.1. The index below 50 indicates contraction of construction activity. Australian Bureau of statistics released on 3 data show that the Australian economy in the second quarter, it was the slowest pace in more than 3 years. Pensiveness AIG, deputy director of the Economic Research Department of Tony, said the building demand continued to be "squeezed by credit tightening and weak investor and consumer confidence. But there are signs that the construction industry has had a low, and in August, the construction industry has slowed for a third consecutive month ". Australia's August commercial building performance index rose to 47.8 in July from 57.1 in February, the first rise in July, the same period of residential building performance index from 37.6 in to 34.5(Figueiredo, A. 2012, 09).Australian dollar against the U.S. dollar rebounded highest to 0.8400, continue to appear sharp decline in the trend, the lowest was 0.8215, closing at 0.8226. From the Australian dollar yesterday's closing point of view, the recent Australian dollar continues downward acceleration average on the 5th, the day before yesterday down below 120 week moving average support 0.8400, Australian dollars for future against the dollar is expected to continue to 0.8090 dropping weekly, the 200 week moving average support(AU-EU Expert Report 2015). Short-term investors pay attention tothe Australian dollar in the 200 week moving average 0.8090 give an important support, if the Australian dollar down below 0.8090. The latter part of the trend is expected to continue to dropping 0.8000-0.7950 of regional support. No previous obviously at the bottom of the form appeared in the Australian daily, investors continue to sell high Australian dollar. Currently the Australian dollar above the pressure in 0.8230, 0.8400. Support at 0.8090, 0.8000(Chafer, T. 2011). Trading strategyTriangular ArbitrageThree point arbitrage and called indirect Arbitrage (Indirection arbitrage), also called triangular arbitrage, using three different foreign exchange market exchange rate, exchange in the three foreign exchange market at the same time to take foreign exchange trading, and earn the from different rates(trading strategy and risk management. 2005).Currency AnalysisMonetary analysis says that exchange rate changes are caused by the imbalance of the money market. There are various kinds of factors in the monetary market: the changes in the domestic and foreign money supply, the changes of domestic and foreign interest rate and the changes in the domestic and international real national income(Goswami, M. P. 2015). The most prominent contribution of monetary analysis is that it is a general theory of the phenomenon of the real exchange rate of floating exchange rate system.General policy tool is a tool to adjust and control the monetary and credit from the whole or the overall situation, which has three main effects on the economic system.(1) open market operationOpen market operation is the bank buy or sell securities (mainly short-term government bonds) to put or return the base currency through open market to control the money supply, and affect the market interest rate policy. Generally speaking, when the economy is booming, too much money chasing limited goods, the bank reduce the commercial banks' reserve by selling securities, and then force commercial banks to reduce or recover the loan, and ultimately achieve the purpose of return money. On the contrary, when the economic depression, the lack of market funds, banks buy securities, so that the financial market money supply is enough. Under the condition of open economy, with the increase of capital flow and the expansion of foreign exchange market, bank's foreign exchange market operation and intervention in foreign exchange market will also affect the quantity and supply of money.(2) further discount policyDiscount policy mainly refers to the monetary authorities to change for commercial banks to bill and then discount rate, affect the discount loan amount and market interest rates, thus on the money supply impact to achieve monetary policy objectives; now it has extended to various commercial bank credit support to the interest rate. (3) statutory reserve ratioThe legal deposit reserve policy refers to the central bank to adjust the statutory deposit reserve ratio, to affect the commercial bank's credit scale, thereby affecting the money supply of a policy measure. The policy can quickly change the commercial bank's deposit expansion multiple and money multiplier, in order to control the money supply.Performance analysis1, The investigation is not deep, the forecast is not accurate. For lack of ability to conduct a wide range of market surveys, often with a small number of information, plus the subjective reasoning and judgment, and blind on the project. The successful experience of the investment, need much research before investment, master the very rich first hand data, the investment prospects for scientific prediction, to ensure that the investment project to achieve the desired results (Brown, A., & Swersky, A. 2012). 2, Investment funds are not in place, to extend the construction period. Some investment project selection is accurate, its technology is relatively mature, but due to congenital lack of funds, the engineered stem stop, dragged on schedule, until completion of the project put into operation, originally in the product life cycle growth period of products, has entered the mature stage or even recession and lost the ability of market competition, enterprises lost the best opportunity for profit.3, The implementation of investment projects in the process of scientific organization and management. The success of a project, not only is the right to choose the project, but also in the project implementation process of scientific organization and management, project contract management, progress control, quality control, cost control and other work, in any part of the problem, will lead to investment projects delayed, missed opportunities, the direct consequence is that the investment income and forecast earnings outlook is very different, and even a huge loss(Social Investment Business. 2013).4, Blind expansion. In order to expand the scope of business, to achieve a diversified business, and blindly to not familiar with the industry, industry investment; in order to expand the size of the enterprise, regardless of their own conditions for cross regional, cross industry mergers and acquisitions, from personnel, capital, management experience, are powerless, leading to investment failure.5. The lack of necessary project feasibility studyPart of the enterprise in the choice of the project did not proceed from reality, regardless of their own conditions and the main business restrictions, do not understand, not familiar with the relevant market requirements, productionrequirements, funding requirements and technical requirements, will focus on how to get government support, take the project approval, almost all the project proposal with the report is around the most likely to obtain government approval, in order to fight for the project, the project report made the government can grant"( Wood, D., Thornley, B., & Grace, K. 2012).ConclusionThe failure of our company show that investment has risk and the investment is changing everyday. As investors, focus on bank and rate changing everyday and learn to preview the market of various currency’s rate is important, just focus on corporate is not enough. Based on commodity trading in the stock, prepayment, accounts receivable and other short-term financing or credit facilities, it is the use various financial instruments in the trade process of financial instruments. In recent years, the international trade financing business has developed, but in the initial stage, it still faces many problems, such as lagging behind, the management system is not smooth, the financing product is single, credit management and trade financing characteristics is not consistent. As bank and companies should make proper decisions according to the changing situation.References:Figueiredo, A. (2012, 09). AU-EU, the contrasting heritage. New African, , 16-17. The AU-EU Expert Report on the Principle of Universal Jurisdiction, 16 April 2015, 42.Chafer, T. (2011). The AU: A new arena for anglo-french cooperation in africa? The Journal of Modern African Studies, 49(1), 55-82.Hazenberg, R., Seddon, F., & Denny, S. (2015). Intermediary perceptions of investment readiness in the UK social investment market. V oluntas, 26(3), 846-871. Brown, A., & Swersky, A. (2015). The first billion: A forecast of social investment demand , Boston Consulting Group Report for Big Society Capital, September 2012. Gregory, D., Hill, K., Joy, I., & Keen, S. (2012). Investment Readiness in the UK , Big Lottery Fund, July 2012, LondonSocial Investment Business. (2013). Investment and Contract Readiness Fund Wood, D., Thornley, B., & Grace, K. (2012). Impact at scale: Policy innovation for institutional investment with social and environmental benefit , Insight at the Pacific Community Ventures & The Initiative for Responsible Investment at Harvard University, Rockefeller Foundation, February 2012Reserve Bank of Australia. 2015, Monetary Policy Decision, Reserve Bank of Australia, Sydney, viewed 20th September 2015,<.au/media-releases/2015/mr-15-08.html>BBC. 2015, US interest rates left unchanged by Federal Reserve, BBC, London, viewed 20th September 2015, </news/business-34286230> Reserve Bank of Australia. 2015, Measure of Consumer Price Inflation, Reserve Bank of Australia, Sydney, viewed 21th September 2015,</australia/inflation-cpi>Palmer, D. 2015, Australian dollar jumps after PM spill, the Australia, Sydney, viewed 21th September 2015,<.au/business/markets/australian-dollar-jumps-after-pm-spill/story-e6frg916-1227527623312>Global-rates. 2015, Japanese central bank’s interest rates, Global-rates, viewed at 22th September 2015,</interest-rates/central-banks/central-bank-japan/boj-inter est-rate.aspx>Options; trading strategy and risk management. (2005). Reference and Research Book News, 20(3)Goswami, M. P. (2015). Non fixed-price trading rules in single-crossing classical exchange economies. Social Choice and Welfare, 44(2), 389-422.。