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Forex

VEDANTA DESHIKA (Practice) (317 Points)

27 November 2010

Pls clarify whether it is always that buying rate of banks will be less than selling rates or can it be the otherway round also? I attend a tution wer da faculty says wer der is a two way quote, lower is the buyin rate n higher rate. Is dis correct? Thanks in advance:-)

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10 Replies

Rohit Singh (ca final) (126 Points)
Replied 28 November 2010

Bank will always buy cheap and sell dear.if you want to buy something the seller would obviously want the maximum price to make higher profits and if someone is buying something from you then also he would want to buy at the lowest possible rate

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ashish khandelwal (article) (166 Points)
Replied 28 November 2010

always bid rate is lower than ask rate

Arpit Bansal (article) (69 Points)
Replied 28 November 2010

Remember 1 thing Banks will always buy cheap and sell dear

Banks are doing business in foreign exchange,so they will always sell at a higher price and buy at lower price

Nishant (Charterted Accountant) (56 Points)
Replied 28 November 2010

hi all

It is not always corect to say that bank will buy at cheap rate and sell at high rate. For example when

transcation is between bank and market . and bank needs to buy dollar . bank has to buy at high rate in the quated two way price . and sell at lower rate

pls share nishuagrawal @ gmail.com

I don't access this form pls paste the view to the above id also

thanks

Nishant

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CA Mudit Agarwal PGDFM,MCP,IFR (Dy. Manager (Taxation)) (289 Points)
Replied 28 November 2010

I m agree with Mr. Nishant..

When bank has made future contract or other such type of contract which is obligatory for the bank to perform at a particular date, and if at that date bank does not have that currency to perform the contract, then the bank will have to purchase the currency from the market at a higher rate (if required).....

But this is a very typical situation to be happened.

generally buying rate is always lower than selling rate.....

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VEDANTA DESHIKA (Practice) (317 Points)
Replied 29 November 2010

Thanks a lot

Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 29 November 2010

Two-Way Quote
This type of quote provides more information to users than a last-trade quote, which quotes only the price at which the security last traded.

An example of a two-way quote would be: Citigroup quote of $52.50/$53.30.
This tells traders they can currently purchase Citigroup shares for $53.30 or sell them for $52.50. The spread between the bid and the ask is $0.80 ($53.30-$52.50).

Bid-Ask Spread

On an exchange, the difference between the highest price a buyer of a security or other asset is willing to pay and the lowest price a seller is willing to offer. Generally speaking, the more liquid an asset is, the lower the bid-ask spread is. As a result, currency, which is considered the most liquid asset, has an extremely low bid-ask spread.

Bid and ask

Bid and ask is better known as a quotation or quote.

Bid is the price a market maker or broker offers to pay for a security, and ask is the price at which a market maker or dealer offers to sell. The difference between the two prices is called the spread.