By eZforex.com, Inc. Evan Shelan, CEO

The Basics of Foreign Exchange (fx101)

About eZforex

Bio• Mr. Shelan, founded eZforex.com, Inc. in 1994. He graduated from University of Texas in

Austin with a BA in economics, While creating his niche in the travel industry for over 15 years, he developed eZforex.com, an adjunct to the travel industry.

• Mr. Shelan transformed the foreign currency exchange model from a single brick and mortar to an affiliate program comprising of banks, credit unions, Airlines , and travel agencies. In addition to the Business-to-Business model, he transformed the business into a web based environment in 1996.

• Mr. Shelan graduated from University of Texas in Austin with a BA in Economics. During his university years, he worked as a security analyst in the investment department of a large bank in Austin, Texas.

• Mr. Shelan was named a Wharton Fellow in 2001 as part of the Wharton Fellows Program at the Wharton School of the University of Pennsylvania. This fellowship combines research- based knowledge and hands-on learning to train leaders to develop new ebusiness models and set new, secure directions for their organizations utilizing the Internet. Mr. Shelan was inducted into the Wharton Society of Fellows for Life.

• Watch for his first book release entitled “Innovating Entrepreneurism” - Today’s entrepreneurs are faced with tough daily decisions, from digitizing business models to competing in today’s marketplace. Innovating Entrepreneurism analyzes clear corporate stratagems, which results in successfully sculpting today’s companies into successful paradigms.

Overview • The Foreign Exchange Opportunity

• Foreign Exchange Terms

• Defining Currency Conversion

• Exchange Rate Quotation

• Factors Determining Rate Changes

Overview, cont.• Getting the Facts!

• Creating an Opportunity for Credit Unions

• Cash Rates vs. ATMs/Credit Cards

• Exchange Rate Comparison - Cash

• Contact Information

The Foreign Exchange Opportunity• The Forex market is one of the largest markets in

the world. Approximately 3.2 trillion USD worth of currency trades each day.

Foreign Exchange Terms• Exchange Rates – (aka Forex rate or FX rate) rate

between two currency pairs specifying the value of one currency is worth in terms of another.

• Currency – may refer to a particular currency, such as Europe’s Euro, US dollar, Japanese Yen, etc.

• Bid – the price of a currency when exchanging back into US dollars (always lower than the Ask).

• Ask – the price of a currency when exchanging USD for a foreign currency (always greater than bid).

• Spread – the difference between the bid and ask

Terms Continued…• Spot rate / Interbank buyers Rate – the rate at which one

bank charges another bank when electronically transferring 1,000,000 or more. Rates changes based on demand/supply within the marketplace and changes throughout the trading day.

• Simple Conversion – is a currency pair including the USD, such as the European Euro to US Dollar.

Defining Currency Conversion• Currency Conversion = The rate between two

currency pairs specifying the value of one currency is worth in terms of another.

Exchange Rate Quotation • An exchange system quotation is given by stating

the number of units of base currency can be exchanged for one unit of another base currency

• Example: The Retail USD vis-à-vis EUR exchange rate is $1.41

• To Compute the cost of 1000 Euros costing $1.41, simply multiply the two numbers together.

Exchange Rate X Number of Foreign Units• Euro = 1.41 (*) 1000 Units = $1,410

Factors Determining Rate Changes

• If INTEREST rates are HIGHER in US, than in other countries, then investors WILL choose to invest in the US, increasing the demand for the dollar…. provided that the expected rate of inflation is not higher in the US than among our trading partners.

If INTEREST rates are LOWER in the US than in other countries, investors will choose NOT to invest in the US, decreasing demand for the dollar.

• If the US INFLATION rate is HIGHER, investors are LESS likely to prefer the US -even with higher interest rates- because of the expectation that the value of the dollar will be ERODED by inflation.

If our INFLATION rate is LOWER, investors are MORE likely to prefer the US, because there will be NO expectation that the value of the dollar will erode.

Exchange rates are clearly influenced by a wide range of economic factors. The Importance of each varies both from country to country.

Factors Determining Rate Changes, cont. 3. Trade imbalances and Confidence effects a country's currency –

Example: If foreign investors are confident that the US economy will be strong, they will be MORE likely to buy American assets, pushing UP the dollar's value – In the long run U.S. Exports may be compromised.

Conversely, If investors are less confident that the economy will be strong, they are LESS likely to buy the country's assets, pushing the dollar's value DOWN. In the long run, American Exporters profit through higher sales and profits.

4. Geopolitical factors effect a country’s currency – example…. Iraq’s demand is low due to political unrest, thus maintaining a lower dinar value.

Getting the Facts!

Creating an Opportunity for Credit Unions• When the Euro is low against the US dollar, Americans

traveling abroad enjoy nice discounts.

• Credit Union members are traveling, thus creating an opportunity for your credit union.

• Any Credit union can easily offer foreign exchange to its members using eZforex’s online solution.

Cash Rates vs. ATMs/Credit Cards

Exchange Rate Comparison - Cash

Contact Information