SigmaForex Discusses The Central Banks

The Central Banks of the Other G-7 Countries

In the wake of World War II, both Germany and Japan were helped to develop new financial systems. Both countries created central banks that were fundamentally similar to the Federal Reserve. Along the line, their scope was customized to their domestic needs and they diverged from their model.

The European Central Bank was set up on June 1, 1998 to oversee the ascent of the euro. During the transition to the third stage of economic and monetary union (introduction of the single currency on January 1, 1999), it was responsible for carrying out the Community's monetary policy. The ECB, which is an independent entity, supervises the activity of individual member European central banks, such as Deutsche Bundesbank, Banque de France, and Ufficio Italiano dei Cambi. The ECB's decision-making bodies run a European System of Central Banks whose task is to manage the money in circulation, conduct foreign exchange operations, hold and manage the Member States' official foreign reserves, and promote the smooth operation of
payment systems.

The ECB is the successor to the European Monetary Institute (EMI). The German central bank, widely known as the Bundesbank, was the model for the ECB. The Bundesbank was a very independent entity, dedicated to a stable currency, low inflation, and a controlled money supply. The hyperinflation that developed in Germany after World War I created a fertile economic and political scenario for the rise of an extremist political party and for the start of World War II. The Bundesbank's chapter obligated it toavoid any such economic chaos.

Trading Systems with SigmaForex - Part2

Dealing systems are on-line computers that link the contributing banks around the world on a one-on-one basis. The performance of dealing systems is characterized by speed, reliability, and safety.

Accessing a bank through a dealing system is much faster than making a phone call. Dealing systems are continuously being improved in order to offer maximum support to the dealer's main function: trading. The software is very reliable in picking up the big figure of the exchange rates and the standard value dates.

In addition, it is extremely precise and fast in contacting other parties, switching among conversations, and accessing the database. The trader is in continuous visual contact with the information exchanged on the monitor.

It is easier to see than hear this information, especially when switching among conversations. Most banks use a combination of brokers and direct dealing systems. Both approaches reach the same banks, but not the same parties, because corporations, for instance, cannot deal in the brokers' market.

Traders develop personal relationships with both brokers and traders in the markets, but select their trading medium based on price quality, not on personal feelings. The market share between dealing systems and brokers fluctuates based on market conditions. Fast market conditions are beneficial to dealing systems, whereas regular market conditions are more beneficial to brokers.

SigmaForex Clarify The Anonymity Of Prices

Prices are anonymous the anonymity of the banks that are trading in the market ensures the market's efficiency, as all banks have a fair chance to trade.

Brokers charge a commission that is paid equally by the buyer and the seller. The fees are negotiated on an individual basis by the bank and the brokerage firm.

Brokers show their customers the prices made by other customers either two-way (bid and offer) prices or one way (bid or offer) prices from his or her customers.

Traders show different prices because they "read" the market differently; they have different expectations and different interests.

A broker who has more than one price on one or both sides will automatically optimize the price.

In other words, the broker will always show the highest bid and the lowest offer. Therefore, the market has access to the narrowest spread possible.

Major Currencies In SigmaForex - Japanese Yen

The Japanese Yen

The Japanese yen is the third most traded currency in the world; it has a much smaller international presence than the U.S. dollar or the euro. The yen is very liquid around the world, practically around the clock.

The natural demand to trade the yen concentrated mostly among the Japanese keiretsu, the economic and financial conglomerates.

The yen is much more sensitive to the fortunes of the Nikkei index, the Japanese stock market, and the real estate market. The attempt of the Bank of Japan to deflate the double bubble in these two markets had a negative effect on the Japanese yen, although the impact was short-lived