Foreign Currency Transactions
What is Parity?
Parity refers to the ratio of currencies of two countries to each other. The interest rates of the country currencies and the economic conditions of the countries can be counted as factors affecting the parities. For example, in terms of Turkey’s foreign trade balance, the majority of exports are a major part of that, and imports denominated in euros due to the US dollar, the EURUSD (Euro Dollar) The importance of parity is greater.
What are the factors affecting the parity?
Political and economic developments in countries are the factors that have the greatest impact on that country’s currency. If there is political and economic stability in a country, the currency of that country gains value. Instability is seen in the depreciation of the country’s currency. In addition, as you can see in our economic calendar, data on the economic outlook of countries on a monthly and weekly basis also have short-medium term effects on country currencies.
Major Parities Major parities
are the parities formed by the most traded currency types in the world. For example, we can give EURUSD, USDCHF, USDJPY, GBPUSD parities.
Minor parities are the pairs formed by a major and a minor currency. Minor pairs are generally in demand locally. We can give USDTRY, EURTRY as an example of minor parities.
Exotic Parities These are
the parities with the lowest share of the total transaction volume followed by local investors.
How to Calculate Parity?
Parity is the ratio of two different countries’ currencies to each other. In this context, we can reach the price of a new pair by using two different pairs.
Euro \ Dollar: 1.10 Pound \ Dollar: If 1.50;
By dividing these two pairs (Euro \ Dollar / Pound \ Dollar), we can reach the value of 0.7333, that is, the price of the Euro \ Pound parity.