Assignment: Guidelines For The Fx

Market Analysis & Trading Strategies

Report
Version 1.11

1. Foreign Exchange Treasury Dealing Report Task

You are a foreign exchange dealing team working for a large Vietnamese bank. Your team trades
major Asian and world currencies (VND, AUD, SGD, JPY, USD, EURO, GBP and HKD) and has been
asked by your senior manager to provide a report on the following:

1. An outline and explanation of the behaviour of the at least two currency pair (e.g. VND/USD,
VND/EURO, and VND/AUD, USD/JPY, USD/EUR, etc.) over the past two years.
2. An outline and explanation of your market view concerning the behaviour of these exchange
rates over the next three to six months.
3. An outline and explanation of what foreign exchange trading strategies you will undertake,
to achieve maximum profits for your bank, as a consequence of your market view outlined in
part 2. (You should include the bank’s role both as a price maker and as a possible
speculator).
4. An outline and explanation of what risks and obstacles you might encounter in attempting to
implement your strategies.

Note that you should not use derivatives product, use only currency spot.

2. Content of the Report

The following structure and guidelines are provided to assist you in writing your reports.

2.1.Executive summary or synopsis

Your report must include an executive summary or synopsis.

2.2.Introduction
What is the name of your organisation? What is the objective of the report? What are the pairs of
currency your team choose to trade for your organization and why? What are your observations and
recommendations? How is the report organized?

2.3.Body of Report (Do not use "Body of Report" as a heading)

2.3.1. FX market past behaviour (performance)

This requires you to select at least 2 pairs of currency (VND/USD, VND/EURO, and VND/AUD,
USD/JPY, USD/EUR, etc.) and do some research on them i.e. collecting and using events and
historical data, etc of the currency pairs to comment on their past behaviours. Outline and explain
the behaviour of the currency pairs in the last 2 years.
 2.3.2. Analysis and market view (forecast)
You then look in to current and future (the forecast period) market conditions and form a view: Do
you think that the exchange rates of the currency pairs you chose will go up or down in the next 3 to
6 months? Why do you think this? For this, you should first identify and analyse the economic
factors that influence the exchange rates (review the slides and lecture notes). Then you should
collect and use financial news and news regarding national and international events which are likely
to have an impact on the market.

Do not simply quote other people’s opinions. You should present your opinion, and explain in your
own words why you hold that opinion in a way that shows that you understand the theory behind
the determination of the exchange rates. You can certainly quote evidence that supports your
opinion, and this evidence must be correctly referenced (do not submit copies of your collected
articles with your report). For your view you should use at least five references.

Very important: you should do some research and discuss your market view prior to the
commencement of the preparation session so you can use it when you devise trading strategies.

2.3.3. Trading strategy

Given your teams views about current and future market conditions, you should devise trading
strategies that you will try to implement over the next six months. These strategies will specify how
you will go about achieving your objectives in a way that benefits your organisation – which currency
you will buy or sell. What will be your spread and how will you manage your margin. This will also
involve devising speculation strategies that will allow you to create a portfolio of currencies that will
enable the bank to take advantage of your predicted changes in exchange rates.

You are a treasury team for your bank. You are free to outline and explain any strategies that you
believe will benefit your bank along with risks and obstacles the bank might face in implementing
them. However, you must be able to explain and justify your strategies and convince your Senior
Manager that they will be profitable for the bank.

The market view and your trading strategies (which are based on that view) are critically important
components of the report. You will not get a passing grade on the report without these components.

2.3.4. Conclusion
A conclusion is compulsory. Failure to present a conclusion will result in loss of marks.

2.3.5. Appendices
Your appendices should include any data tables or figures you may want to use to support your
analysis in the report. Label appendices clearly and refer to them in the body of the report.

2.3.6. Reference List

The reference list is compulsory. Failure to provide a reference list will result in loss of marks. The
format of your reference list should follow the Harvard referencing style.

3. Assessment Criteria for the Report

Marks will be allocated on the basis of:
1. The extent to which the report adequately deals with the specific guide/brief that has been
provided.
2. The quality of the written presentation. This includes executive summary, technical structure of
the report, logical sequence of presenting information and developing argument, citation of
reference material, etc.
3. The extent to which the report analyses the issue or problem rather than merely describes it.
4. The extent of research undertaken and use of relevant literature.

Please see the marking sheet in the next page for the specific marking allocation on each criterion
for the assignment.

4. Report presentation and format

 Use Calibri font with font size not smaller than 12. For "line spacing", use 1.5 lines or double.
Text should be justified.
 Your report should be presented as a business report to your Senior Manager. As such, it
should be clear and concise. Include all relevant information, but only relevant information.
 The report must be completed in accordance with the University’s published "Written
Reports and Essays: Guidelines for Referencing and Presentation in RMIT Business", that is
available on the University’s web page and MyRMIT.
 Formatting is important. Reports are to be well written and students are expected to follow
the guidelines set out in the document entitled "Written Reports and Essays: Guidelines for
Referencing and Presentation in RMIT Business". This can be found at the web site:
http://prodmams.rmit.edu.au/s9sx559hurvc.rtf
 There is considerable information in this document and it is well worth reading. There is also
material on the web site: http://www.dlsweb.rmit.edu.au/bus/public/referencing/
 The report should not exceed 2,500 words in total. This excludes the executive summary,
appendices, table of reference and reference list. The document should be formatted
following the guideline below and the RMIT presentation guidelines:
 References should be presented using the RMIT modified Harvard (authordate) referencing
system. A copy of the referencing and presentation guidelines is available at
http://mams.rmit.edu.au/s9sx559hurvc.rtf
 You are the treasury team for your company. You are free to make any decision that you
believe will benefit your firm. However, you must be able to explain and justify your actions
and convince your Senior Manager that you your recommendations are valid.
 This is a group assignment and both copying and plagiarism will be heavily penalised.
Turnitin will be used to identify plagiarism issues.
 Submit a softcopy using the Turnitin link on Blackboard under folder "Assessment Tasks"
then "FX Report" before the beginning of Lecture (the first class) in Week 10. Time: 8:59am
Monday 19-Dec-2016.
 Submit a hardcopy to your tutor during the Lecture in Week 10. Your paper will not be
marked without a hardcopy.
5. Instructions for collecting data
5.1.Collect data
You can use websites like http://www.tradingeconomics.com

Yahoo! Finance, Bloomberg, imf.org

Thomson Reuters Eikon

5.1.1. Data selection

Pick a bank name in Vietnam, 2 pairs of currencies (3 currencies)

5.1.2. Collect historical data

Collect 2 or 3-year historical data until NOW or longer period if necessary: take annual rates.

 Currency pairs charts

 GDP growth rate NOT GDP
 Inflation
 Interest rates
 Government Intervention
 Specific factors: commodities, market expectations…

For each country/currency. For example, if you have VND, USD and Yen, you have to collect data on
those 3 countries.

5.1.3. Collect 6-month forecast

Now - 6 months later (NOT your forecast, they are available from websites).

 Currency pairs charts

 GDP growth
 Inflation
 Interest rates
 Government Intervention
 Specific factors: commodities, market expectations…

5.2.Analysis of historical macro factors

Use data in 5.1.1 to explain the impact of macro-economic factors on past behaviour of currency
pair. Do not just describe the factors!

5.3.Market View
Your own forecast of future exchange rates.

Use data to analyse impact of forecast factors collected in 1.c to make-up and justify your own
forecast of exchange rate.

Example: Based on Vietnam/US GDP growth, inflation forecast… (justify in details), we can conclude
VND will appreciate or depreciate and the future exchange in 6 months will be USD/VND 21,150.
 5.4.Trading strategy
Example: Use spot rate USD/VND 21,100 and YOUR forecast USD/VND 21,150 to execute a strategy
of buy USD now low and sell it high in 6 months.
FX Market Report Marking Sheet
Report Mark distribution Your score
Preparation
Company Name & Business
Objectives & Currency Pairs
Historical Data of the 2
Currency Pairs
Forecast Period data
Report Presentation
Justified text, 1.5 line
spacing, 1”margin, Font
type, size 12pts. Word count
2500
Spelling & grammar
Structure of report,
paragraphs & sentences
Correct use of units, quotes,
quantities, and Harvard
referencing style
throughout
Executive Summary
Introduction
Review and forecast on currency pairs,
(understanding concepts & tools)
Factors influencing
exchange rates (eg.
Inflation,
growth rates, interest rates,
government
intervention)
Market specific factors
(expectations, speculation)
Market view (forecast of
currency movement)
Trading
Strategies (correct use of
tools and concepts)
Profit/Loss expected (or
exposure reduced)
Risk anticipation
Conclusion
Appendices & Reference
List
Total Available Mark