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The following are quotes from a currency dealer in the New York currency market:

Currency Spot quot<e Australian dollar (AUD/USD) 0.7177 - 0.7179 Brazilian real (USD/BRL) British pound (GBPUSD) Canadian dollar (USD/CAD) Euro (EUR/USD) Japanese yen (USD/JP Mexican peso (USD/MXP New Zealand dollar (NZD/USD) 0.6799 - 0.6801 Thai baht (USD/THB) South Africa rand (USD/ZAR)13.859 - 13.889 South Korean won (USD/KRW)1117.34 - 1119.34 Swiss franc (USD/CHF) 3.6854 - 3.6858 1.2775 - 1.2778 1.3208 - 1.3212 1.1528 - 1.1532 108.29 - 108.30 19.232 - 19.241 31.940 - 31.960 0.9756 - 0.9761

Spot exchange rates and trades

1a. Which currency above has the widest bid ask spread?

Which has the narrowest?

b. Which currency above has the widest percentage bid ask spread?

Which has the narrowest?

2. Using the quotes provided above, answer the following question. (Phrase your explanation in parts b and d: as “If you sell one (specify the currency) to the dealer, you will receive (specify the number of units and the currency)” or “If you buy one (specify the currency) from the dealer, you will pay (specify the number of units and the currency)”.)

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Answer #1

1a: Widest spread =

USD/KRW

Narrowest spread = AUD/USD and NZD/USD

b: Widest percentage spread = USD/ZAR

Narrowest percentage spread = USD/JPY

2: If you sell one EUR you will receive 1.1528 USD and if you buy one EUR you will have to pay 1.1532 USD.

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