Assessment Task 2 - Stage 2 FX report - Group 5

1 ° WRK19 - Monday 9:30 - Di Mo - Group 5 1
2 1. Trading strategy and explanation of the transactions a. Primary objective The primary task entails converting GBP to USD and AUD, which is also our primary objective. To achieve this, we plan to purchase the exact quantity of the lot that was sold on that day. In general, we divide and sell a dispersed quantity of a currency when the market is liquid, disregarding the increasing heavy losses when holding the stocks because we have sufficient capital, and begin purchasing these lots back when the uptrend begins to diminish. In addition, in order to complete the task as cheaply as possible, we must calculate the quantity of the lot that we must bring to the market on that day based on our forecast and prepared data, with a focus on the USD, the most valuable currency. First, in order to finance expansions in the United States, we must raise USD 35M by selling equivalent GBP units. Given that the maximum quantity of money we could trade per transaction is USD 20M, we purchased USD 20M in our first transaction by selling spot GBP at Bank 17 at the offer rate of USD/GBP 1.2585. Then, in order to reach our objective, we continued to purchase additional USD 15 million from Bank 16 at an offer rate of USD/GBP 0.8007. On the other hand, we are required to raise AUD 34M for the procurement of gaming equipment. With a similar allocated amount of money each transaction, we had split the total amount into two parts which shown in Payment 4 and 5 respectively. In Payment 4, we bought AUD 14M and simultaneously sold GBP at the offer rate of AUD/GBP 0.5125. We also bought AUD 20M by selling GBP at the same offer rate as the payment 4 and finished the primary task. Our Term amount, which is GBP, was 10.250.000 at that time. b. Secondary objective According to the previous section's 6-month forecast, the USD will appreciate against the AUD and JPY, while the AUD will depreciate against the JPY. Consequently, based on our speculations regarding the movements of exchange rates over the next few months, we will be mindful of what our clients and competitors on the foreign exchange market would do to grasp our opportunity and generate the greatest profit with the currency pairs provided. In terms of the AUD/USD and USD/JPY exchange rates, we should specifically purchase the USD while simultaneously selling the AUD and the JPY. For the AUD/JPY pair, the JPY should be bought and in turns the AUD should be sold. In our last trading simulations, we executed the speculation strategies by starting to sell the AUD 20M to buy the USD which is shown in payment 6. Selling the AUD also means that we need to have the highest bid rate, which the bid rate of AUD/USD at that time when calling for Bank 16 was 0.6388. Since we were allocated 40 million units of each currency as the initial balance, we continued to trade for another AUD 20M to get the USD currency at the bid rate of 0.6406 from Bank 17. Moving on to the next currency pair, USD/JPY, to buy the USD, we sold the JPY 2B in each transaction respectively since we had 4B JPY for the initial balance. Our primary goal in this combination was to secure the most favorable offer rate available. In 2
3 payment 9, the Yen had been sold in the amount of 2 billion at the offer rate of the USD/JPY of 146.8700 given from Bank 17. The offer rate experienced a significant increase to 146.7700 upon initiating a call with Bank 13. However, subsequent enquiries with other banks led us to conclude that this rate was optimal at the given time. Consequently, we proceeded to engage in a transaction with Bank 13, involving the sale of JPY 2 billion and the acquisition of USD. Lastly, for the AUD/JPY pair, we sold the AUD 20M at the bid rate of 94.0000 from Bank 13 to purchase the Yen due to the appreciation of the JPY. To reach our goal of selling AUD 40M, we continued to transact with the same bank, which at the time offered the highest bid rate - 93.9800 for the AUD/JPY bid rate - in order to sell the remaining AUD 20M. 2. Analyze the profit and loss of the trading Overall, we have achieved the objectives that company 5 has to complete. However, we don't make any profit when we close the position. Following the trading simulations, we produce those tables to summarize the result. In the primary objective, we completely raise USD 35M and AUD 34M by selling the comparable amount of money in GBP. We make a mistake in the 2 and 3 transactions when we sale the currency in the mission of company 5. In the secondary objective, we forecasted a depreciation of AUD and JPY compared with USD while JPY was expected to appreciate to AUD. In the second task, therefore, the position was closed when we sold AUD, raised USD and JPY. 3
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