Contents Introduction Chapter I. Theoretical foundations of currency regulation

Source: https://www.cbr.ru/eng/currency_base/daily/

“As of October 19, foreign exchange reserves grew to $461.4 billion against $460.4 billion in the previous week, marking a 0.2 percent increase. The boost was due to “positive market re-assessment and gold monetization”¹⁴
Currency operations are considered integral part of investments. If a company or government desire to invest to another county or company without any exceptions they have to participate in this procedure.
Diagram 2.1.2

Source: UNCTAD, FDI/MNE database (www.unctad.org /fdistatistics)

“FDI flows into Russia have been on the decline since 2013, due to geopolitical tensions between Russia, Ukraine and the Western countries. While inflows rose to USD 37.1 billion in 2016, they fell once again in 2017 to USD 25.3 billion, the second lowest level since 2006 (UNCTAD World Investment Report 2018). According to preliminary estimations from UNCTAD (Investment Trends Monitor, 2019) FDI inflows to Russia decreased by 14% in 2018 and merger and acquisitions sales dropped by 82%. Russia’s main investing partners are Cyprus, Luxembourg, the Netherlands, the Bahamas, Bermuda, Ireland and the UK. The main invested sectors are mining and quarrying, manufacturing, trade and repair of motor vehicles, financial and insurance activities, public administration, defence and social security and real estate activities.


2.2 Currency market of the USA: Exchange rate and the balance of payment
The official currency of the United States is the United States dollar. Today, the US dollar is a universal means of payment in international business, a safe haven in various financial and political crises in other countries, as well as an object of international investment due to the large amount of highly reliable securities - US long-term government bonds. The US dollar occupies a significant share of the foreign exchange reserves of the central banks of various countries. The US dollar is a generally accepted base currency when quoted in other currencies.
It participates as a party to the transaction in approximately 87% of all transactions in the Forex market. All this cannot but manifest itself in the enormous influence of the US economy through the US dollar on world currency markets, the influence of determining the direction and nature of the movement of markets.
Currency policy for the US dollar is determined by the Federal Reserve System - the central bank of the United States of America. The main methods of the Fed's influence are: open market operations, the discount rate and the course of the funds of the Federal Reserve System.
It is no secret that American currency market has some unique components compared with the markets in the other countries. The flawlessness of the exchange trading system in the USA is an obvious fact. It is obvious that currency trading is highly cultivated in the USA and during the long historical period of its existence has developed some traditions and rules. There is no doubt that the launch of the Forex markets has strong impact on the present life. All the above-said creates a fertile soil for the activity of traders and development of Forex trade. In addition to the launch of Forex US markets, there are some other factors, which affect currency market in the world. Furthemore, it is considered one of the countries which currency operations can occur widely and easily. These things contribute to be known this country’s economy in the world.
“As a follow-up to the aforementioned law, the Law on Reporting on International Currency Transactions (Currency and Foreign Transactions Reporting Act, 1982 (31 USC §§ 5311 et seq)) was passed, according to which non-residents are obliged to notify the Internal Revenue Service of the US Treasury if they are imported or exported abroad, an amount greater than the equivalent of 10 thousand dollars in cash, traveler's checks, etc. US citizens and foreigners residing in the United States are obliged to provide information about their accounts in foreign banks, the amount of which amounts to 10 thousand US dollars in the specified year for which they receive interest and have the right to sign.”¹⁵

“STANDALONE SPOT AND FORWARD TRANSACTIONS

For any operation that involves standalone spot or forward transactions in foreign currencies:
A. Approval of such operation is required as follows:
i. The Committee must direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3. C of this Authorization, exceeding $5 billion since the close of the most recent regular meeting of the Committee. The Foreign Currency Subcommittee (the “Subcommittee”) must direct the Selected Bank in advance to execute the operation if the Subcommittee believes that consultation with the Committee is not feasible in the time available.
ii. The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, totaling $5 billion or less since the close of the most recent regular meeting of the Committee
B. Such an operation also shall be:
i. Generally directed at countering disorderly market conditions;
ii. Undertaken to adjust System balances in light of probable future needs for
currencies;
iii. Conducted for such other purposes as may be determined by the Committee.
C. For purposes of this Authorization, the
overall volume of standalone spot and forward transactions in foreign currencies is defined as the sum (disregarding signs) of the dollar values of individual foreign currencies purchased and sold, valued at the time of the transaction.”¹⁶
The Federal Reserve Board is seeking comment on a proposal that sets standards for banking organizations regulated by the Federal Reserve that engage in certain types of foreign exchange transactions with retail customers.
The proposal, issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, outlines requirements for disclosure, recordkeeping, business conduct, and documentation for retail foreign exchange transactions. Institutions engaging in such transactions will be required to identify themselves to their regulator and to be well capitalized. They will also be required to collect margin for retail foreign exchange transactions.
The types of transactions covered by the rule include off-exchange futures and options on futures, over-the-counter options on foreign currency, and so-called rolling spot transactions. The proposal does not include regular spot transactions, listed options on foreign currency, and foreign currency forwards and swaps. The proposal would cover entities regulated by the Federal Reserve including state member banks, bank and financial holding companies, Edge Act and agreement corporations, and uninsured state-licensed branches and agencies of foreign banks.
“On November 30, 2011, the Federal Open Market Committee authorized foreign currency swap arrangements between the Federal Reserve and the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. In addition, these foreign central banks also established bilateral swap arrangements with one another. These swap lines were authorized as a contingency measure, so that central banks can offer liquidity in foreign currencies if market conditions warrant such actions. These lines are authorized through February 1, 2014. To date, the Federal Reserve has not drawn on these swap lines.”¹⁷
Table 2.2.1

Source: https://moneyexchangerate.org/currencyexchange/usd

Diagram 2.2.2

Diagram 2.2.3

Source: UNCTAD, FDI/MNE database (www.unctad.org /fdistatistics)
The balance of payments (BOP) is an accounting of a country's international transactions for a particular time period.
Any transaction that causes money to flow into a country is a credit to its BOP account, and any transaction that causes money to flow out is a debit.
The BOP includes the current account, which mainly measures the flows of goods and services; the capital account, which consists of capital transfers and the acquisition and disposal of non-produced, non-financial assets; and the financial account, which records investment flows.
Diagram 2.2.4


https://www.weforum.org/agenda/2018/06/mapped-the-countries-with-the-most-foreign-currency-reserves/

Table 2.2.5