- What is FX?
- History of SriLankan security and the beginning of the currency exchange within SriLankan.
- Economic and political risk
- Foreign exchange rates.
- Foreign exchange exposure
- How to manage foreign exposures?
- Government security markets in Sri Lanka.
- Security and exchange commission
What is FX?
FX or the forex refers to the foreign exchange market. This is a global Centre for exchanging currencies. This has become the largest market in the world as a result of the worldwide development of trade and commerce. Currency exchange has become very important today, because of the foreign trade relationships. The trading of currencies has become electronic as all the transactions are done within computer systems.
History of SriLankan security and the beginning of the currency exchange within SriLankan.
The history of SriLankan runs back to 2500 years. Since ancient times they have achieved their security by themselves. Since ancient times SriLankan has faced so many security problems due to the geographical location. As this Island is the heart of the Indian Ocean, this was a main trade Centre during the last few centuries. The security concept of SriLankan history can be divided mainly into two phases. The first security phase runs from the establishment of kingdoms and until the establishment of power in western provinces. The second phase starts when they experience the entry of western power into the country and up to today.
During the first SriLankan millennium they didn’t face any security problems except for the invasions from south India. During the 3rd century, Sri Lankans were able to build strong security relationships with the Mauryan Empire of India. In later stages, the message of peace was propagated all over the world as a result of Buddhism.
The situation was changed after the 5th century. During this period there were several civil wars within the country. This was the landmark for the construction of the rock fortress called “Sigiriya” by king Kashyapa. In every early period, the goods were exchanged between the neighboring countries. SriLankan was able to build trade relationships with the other leading countries of the world. At the very beginning, the goods were exchanged between the countries. After the beginning of the usage of currencies, this was changed and was evolved up to today.
The value of the currencies of different countries was different, this was the reason which courses for the evolvement of the currency exchange.
Economic and political risk
Before making investments in a foreign country the following things are needed to consider.
Political risk – It is important to consider the political decisions of the related country. The decisions made by them can influence the financial state of the country. Although the economy of the country is strong and if the political decisions are questionable, You are invited to think twice before making an investment.
Economic risk– The country must be able to pay back the debt that you deposit. For that, the country needed to have a strong economic strength.
Sovereign risk – The foreign central bank can change its exchange regulations. It is a must to analyze the sovereign risk before making investments. Because this can course nullifying the value.
Foreign exchange rates.
The rate between two currencies when it comes to currency exchange is called the rate of the exchange. Always the rate is determined by the foreign exchange market which is open for the entire 24hours. Buying and the selling rate are the two main factors that determine the exchange rate.
Foreign exchange exposure
The financial risk of exposure to unanticipated changes in exchange rates within the exchange market is called foreign exchange exposure. There are three main types.
- Economic exposure – when there are unexpected fluctuations within the exchange rates
- Transaction exposure – the risk of loss from a change in exchange rates during the course of a business transaction.
- Translation exposure – the risk that a company’s equities, assets, liabilities, or income will change in value as a result of exchange rate changes.
How to manage foreign exposures?
There are two main methods to overcome this exposure.
The pooling of the risk – Portfolio investments
Hedging of risk – Different parties get involved in agreements that lower the risk of other parties.
The security situation in SriLankan to avoid foreign exchange exposure
The currency of the invoice can be used by the importers and exporters to reduce the risk. This is a very simple method where the domestic and the foreign currency is invoiced.
By borrowing the foreign currency to match with the future deteriorations can help the clients avoid difficulties in the future.
Government security markets in Sri Lanka.
The Treasury bill market is considered as one of the segments of the exchange market. They provide financial instructions and alternative sources for the investments.
The Treasury bond market is issued by the government of Srilanka. This is considered as a medium and long-term instrument of debt in Srilanka. This Treasury bond market is conducted according to the Stock and Securities Ordinance No. 7 of 1937 in Srilanka.
- Free of risks
- 2-20 years of maturities are available.
- Scrip fewer forms are issued
- The yield rate is totally determined by the market
- Half-year coupon payments are available.
Security and exchange commission
This was established in 2007 and this ensure the security of the SriLankan capital market. The division of cooperative affairs is responsible to provide material information to the customers. Finance and the administrative division is responsible to maintain the functions of the security exchange commission on a smooth manner. The supervision section always guide all the dealers to the correct direction.
Is forex legal in Srilanka?
Forex trading within Srilanka is not legalized and it is not allowed for the general community to invest exchange market.
How much can I carry out of Srilanka?
Any person can carry legally authorized currency up to $10,000 without any issue. SriLankan Custom department has already declared the limitations within the country for the currency exchange.
Is forex a banned opportunity in Srilanka?
As it is not legal within Srilanka, It is an offense and punishable within the country if anyone involves in forex trading.
Is Expertoption legal in Sri Lanka?
According to the central bank of Srilanka, it is illegal to maintain the binary trading options within Srilanka.
Is forex dangerous?
As they do not have the daily exchange price limits. So it a risk to use forex for earnings.
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