Question

Dealer A quotes 1.5053 – 62 for the EUR/NZD exchange rate to company XYB.

Calculate:

(i) the price at which A is willing to buy the EUR

(ii) the price at which company XYB can buy the NZD

(iii) the price at which A is willing to sell the EUR

(iv) the price at which company XYB can sell the NZD

(v) the dealer’s spread

(vi) Dealer A also quotes EUR/USD 1.1832 – 700. Calculate USD/NZD.

Answer 1

Given, Dealer A quotes 1.5053 – 62 for the EUR/NZD exchange rate to company XYB.

Which means Bid Rate = 1.5053EUR/NZD, whichmeans Dealer is willing to Buy 1NZD for $1.5053EUR

Ask Rate = 1.5062EUR/NZD, whichmeans Dealer is willing to Sell, i.e., Company XYZ can buy 1NZD for $1.5062EUR

Similarly for Dealer will be willing to Buy/sell EUR for:

Indirect Quote = (1/1.5062) - (1/1.5053) NZD/EUR = 0.6639 - 0.6643 NZD/EUR

(i) the price at which A is willing to buy the EUR = 0.6639 NZD/EUR

(ii) the price at which company XYB can buy the NZD = $1.5053EUR/NZD

(iii) the price at which A is willing to sell the EUR = 0.6643 NZD/EUR

(iv) the price at which company XYB can sell the NZD = 1.5062 EUR/NZD

(v) the dealer’s spread = (1.5062 - 1.5053) / 1.5062 = 0.05975%

(vi) Dealer A also quotes

EUR/USD 1.1832 – 1.1700

EUR/NZD 1.5053 – 1.5062

USD/NZD(Bid) = USD/EUR(Bid) * EUR/NZD(Bid) = (1 / EUR/USD(Ask)) * EUR/NZD(Bid)

USD/NZD	(1/1.1700)*1.5053	(1/1.1832)*1.5062
USD/NZD	1.2866	1.2730
	BID	ASK