Foreign Currency Trading
Introduction
To trade in foreign currencies, one has to be conversant with the current exchange rates in the
financial market. I chose to trade in Euro (€) as it is relatively available and acceptable in most
countries. On July 1 2015, the Euro was trading at 1.135 in the financial markets (Yahoo
Business Finance, 2015). The portfolio balance between the Euro and the British pound had
marginal differences hence I opted to deal only with the Euro. The total amounts in Euros after
conversion amounted to €898,069.20. On July 2, the dollar gained marginally against the Euro
and a loss of 0.907% was registered. On 6 July the loss increased to 1.257% and the one million
deposited decreased to an equivalent of $987,427.10 dollars. On July 20 the loss continued
further and 2.739% was lost, the equivalents of dollars lost were $27,391.06. The amounts
invested in dollars were 1000,000 but now according to the exchange rates the equivalent
amounts in dollars that was in the bank amounted to $972,608.90. The loss trend continued till
early September 2015 when the trends turned slightly better. On September 13, the Euro gained
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marginally against the dollar. The Euro increased by 0.234%. The amounts invested amounted to
an equivalent of $ 1,002,335 when converted at the rates that were prevailing on that day.
On August 25, the Euro was at its best performance against the dollar in the last two months and
it gained by 4.023%. The total amounted invested amounted to an equivalent of $1,040,234
hence a gain of $40,234. I decided to sell the Euros for the US dollars as it was the best period to
sell the dollar. However the best time to invest in the Euros would have been on July 20 when
the dollar was trading at a low of €1.083 for every dollar and sell on August 25 at a high of
€1.1583 and it would have resulted in total earnings of 6.95% or $1,069,529.
On August 26, i converted all the earnings to Australian dollars which amounted to AUD
1,463,663. On August 28, I sold all the Australian dollars and obtained a profit of 0.97% on the
transactions. After paying the transaction fees amounting of $301.755, i remained with $1,049,
955 which i converted to British pounds on the same day. On August 31, I made my last
transaction and sold all the British pounds and earned a profit of 0.023% from the two day’s
transaction. The total amount of earnings from the two months transactions amounted to
$1,050,194 after deducting a transaction fee of 0.75%. The total profits were $50,194.00 dollars
or 5.02% from the principal amount.
Calculations for the last five days of trading
1040234 – 1000,000 = 40234 * 0.75% = 301.755 (40234-301=39932.25). On August 26 i
Converted the total amount after deducting the transaction cost of 0.75%
to Australian dollars which amounted to AUD 1463663
Date AUD/USD AUD USD %Change
26-Aug 0.7105 1463663 1039932 –
27-Aug 0.7125 1463663 1042859 0.28
28-Aug 0.7174 1463663 1050031 0.97
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Sold all the AUD and obtained a profit of 0.97% which totaled to 1,049,955 after
Paying the 0.75% transaction fees.
On Aug 28 converted all the earnings to British Pounds and obtained a total of
₤602,937.30. On August 31 I sold all the pounds and obtained a profit of 0.023%
On the earnings. The total amount after deducting the transaction fee amounted
to $1050194.
GBP/USD GBP USD %
28-Aug 1.7414 602,937.30 1049955 –
31-Aug 1.7418 602,937.30 1050196 0.023
Calculations for the month of July and the first twenty-five days of September
Convert the $1000,000 into Euros on 1 July 1 rates are €1= $1.1135 = € 898069.2
July August
Date EUR/USD Amt – € Amt – $ %
Change
EUR/USD Amt – € Amt – $ %
Change
1 1.1135 898069.2 1000000 – 1.0939 898069.2 982397.9 -1.76021
2 1.1034 898069.2 990929.6 -0.907 1.0939 898069.2 982397.9 -1.76021
3 1.1087 898069.2 995689.3 -0.431 1.0969 898069.2 985092.1 -1.49079
4 1.1087 898069.2 995689.3 -0.431 1.0956 898069.2 983924.6 -1.60754
5 1.1087 898069.2 995689.3 -0.431 1.0889 898069.2 977907.6 -2.20924
6 1.0995 898069.2 987427.1 -1.257 1.0903 898069.2 979164.8 -2.08352
7 1.1049 898069.2 992276.7 -0.772 1.0927 898069.2 981320.2 -1.86798
8 1.101 898069.2 988774.2 -1.123 1.0927 898069.2 981320.2 -1.86798
9 1.1071 898069.2 994252.4 -0.575 1.0927 898069.2 981320.2 -1.86798
10 1.1063 898069.2 993534 -0.647 1.0965 898069.2 984732.9 -1.52671
11 1.1063 898069.2 993534 -0.647 1.1017 898069.2 989402.8 -1.05972
12 1.1063 898069.2 993534 -0.647 1.1042 898069.2 991648 -0.8352
13 1.1129 898069.2 999461.2 -0.054 1.1161 898069.2 1002335 0.233503
14 1.099 898069.2 986978.1 -1.302 1.1161 898069.2 1002335 0.233503
15 1.1008 898069.2 988594.6 -1.141 1.1161 898069.2 1002335 0.233503
16 1.0944 898069.2 982846.9 -1.715 1.1161 898069.2 1002335 0.233503
17 1.0886 898069.2 977638.1 -2.236 1.1093 898069.2 996228.2 -0.37718
18 1.0886 898069.2 977638.1 -2.236 1.1078 898069.2 994881.1 -0.51189
19 1.0886 898069.2 977638.1 -2.236 1.1031 898069.2 990660.1 -0.93399
20 1.083 898069.2 972608.9 -2.739 1.1118 898069.2 998473.3 -0.15267
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21 1.0835 898069.2 973058 -2.694 1.1237 898069.2 1009160 0.916036
22 1.094 898069.2 982487.7 -1.751 1.1237 898069.2 1009160 0.916036
23 1.0927 898069.2 981320.2 -1.868 1.1237 898069.2 1009160 0.916036
24 1.0989 898069.2 986888.2 -1.311 1.1377 898069.2 1021733 2.173333
25 1.0989 898069.2 986888.2 -1.311 1.1583 898069.2 1040234 4.023355
26 1.0989 898069.2 986888.2 -1.311 1.1551 898069.2 1037360 3.735973
27 1.0972 898069.2 985361.5 -1.464 1.134 898069.2 1018410 1.841047
28 1.109 898069.2 995958.7 -0.404 1.1248 898069.2 1010148 1.014824
29 1.1066 898069.2 993803.4 -0.620 1.1248 898069.2 1010148 1.014824
30 1.0984 898069.2 986439.2 -1.356 1.1248 898069.2 1010148 1.014824
31 1.0939 898069.2 982397.9 -1.760 1.1214 898069.2 1007095 0.70948
N/B The initial investment in July was a bad investment hence the investment was tied till the
recovery of the dollar in early September.
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Reference
Yahoo Business Finance (2015)
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Indices
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Foreign Currency Trading
