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CURRENCY

NSE Currency Derivatives

NSE currency derivatives, A futures contract provides for the exchange of one currency for another at a given future date at a price (exchange rate) set at the date of purchase. Currency derivatives NSE are commonly regarded as one of the best choices if you want to reduce the chance of foreign currency exchange fluctuations. Let’s take a look at the definition of currency derivatives NSE and how you can trade them. Currency is something that has a fixed value and is exchanged, for goods and services. So basically, or in layman's terms, the currency is money in physical (legal tender) or electronic form. Every country has it's own currency. The most-traded currencies are USD, GBP, EUR, and JPY.

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Basics of currency trading in India

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Trading

  • The exchange rates keep fluctuating based on various data that is released by the government and the central banks of the country. So one might initiate a short or long position just to benefit from those small moves.
  • For example, If a trader thinks that the USD is going to strengthen against the INR than he/she will buy the pair. The prediction or speculation is right the pair will move higher and the trader will end up making money and vise versa.

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Hedging

  • A hedger takes a position in the currency derivatives to protect himself from the fluctuation in the exchange rates. These are people who either are supposed to make or receive a payment in foreign currency. It includes importers or exporters of goods and services.
  • For example, If an exporter has exported goods worth $1000 and will receive the payment in the next 3 months, a falling dollar is an underlying risk. Hence he can short USDINR futures to reduce the risk.

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Low margin requirement:

  • This is one of the most motivating factors for most currency traders. The margin required for trading in currency is exceptionally low as compared to commodity and in some cases the equity.
  • What makes this proposition interesting? Like in equity derivatives, currencies to are cash-settled (no delivery) on a daily basis. This makes it.

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Deep dive in Currency Derivatives

  • Derivatives are exchange-traded contracts the value of which are derived from an underlying asset that has an intrinsic value. 
  • Currency derivatives are exchange-traded futures and options contracts whose price movements depend on the underlying currency pair.
  • For Ex the USDINR futures will move in tandem with the USDINR spot rates that keep changing depending on the data that is released, like the PMI, CPI, inflation, unemployment figures, etc.

  •  In currency trading and investing, currencies are considered in pairs like the Rupee-Dollar pair. So if someone has a bullish view on the Dollar he can buy the pair. Buying the pair also implies that the trader or investor is selling the rupee.
  • In India, the USDINR, GBPINR, EURINR, and JPYINR are the most traded currency derivatives, along with the cross-currency pairs i.e. EURUSD, GPBUSD, and USDJPY.

  • Currency Derivatives are essentially financial instruments or contracts (also known as underlying variable market conditions such as bonds, stocks, or currencies) which base there value on spot market price results.
  • It is a deal between two traders that will mutually agree to exchange currency in the future at a fixed price. 'Derivatives' suggests that it derives value from the underlying value and that it has no independent value as well.

  • Bullion, shares, currency, commodities, stock market index, or something else, maybe underlying. The underlying would mean the currency exchange rate, from the point of view of currency derivatives. Derivatives help protect your portfolio against any risk, and can also be used for speculation and arbitrage productively.
  • There are 2 types of derivatives futures and options. The currency market is also known as the foreign exchange market or forex which is a market where the world’s currencies change hands and it is the largest financial market in the world. 

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Frequently asked Questions

attention-icon Attention Investors

1) Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. 2) Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from depository on your email id and/or mobile number to create pledge. 3) Pay 20% upfront margin of the transaction value to trade in cash market segment.  4)Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued vide circular reference NSE/INSP/45191 dated July 31, 2020 and NSE/INSP/45534 dated August 31, 2020 and other guidelines issued from time to time in this regard.5) Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month. 6) For Stock Broking transaction : Prevent unauthorised transactions in your account 7) KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (Broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary  8) Update/ confirm your mobile number/email ID with us OR If you wish to change/ modify the current Mobile No. & E-mail ID, you are requested to provide MODIFICATION FORM duly filled in and signed OR If you do not want to provide Mobile No. & E-mail ID, you are requested to send DECLARATION FORM duly filled and signed.  9) Receive information of your transactions directly from exchange on your mobile/email at the end of the day...Issued in the interest of Investors 10) No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remain in investor's account. 11)As per SEBI Circular MIRSD/ SE /Cir-19/2009 dated December 3, 2009 Client transaction account shall be required to do the actual settlement of funds and securities at least once in a Quarter or month.