Foreign Exchange Market and Mutual Fund Manager

mutual fund manager: For instance, if you're a corporate treasurer or mutual fund manager, you might need to convert 10 million euros into dollars today. But what time today? Ugh, what an awful question. If you bought dollars when you got to work today at 8 a.m. in New York, when the euro would buy around $1.128, then by 3 p.m., with the euro around $1.1325, you'd look, you know, slightly stupid. Not catastrophically stupid. Not like the guy who decided to stop hedging Swiss francs the week before the Swiss franc exploded. But you bought $11.28 million for your euros, and you could have bought $11.325 million if you'd waited a few hours. You lost $45,000. You look a little dumb, according to Bloomberg. That is not good advertising for the foreign exchange market! That market -- I mean, the dealers who make money in that market -- want you to be happy, so you come back and trade more foreign exchange. So they came up with a way to do that. It goes like this: Establish some price -- say, the price at 4 p.m. in London -- as the day benchmark price. Guarantee you the benchmark price. With no fees and Finance is about managing and allocating risk, and one of the most important risks in the corporate world is the risk of looking slightly stupid. Not because it the worst thing that can happen to you, but just because modern life presents so many opportunities to look slightly stupid. If you can cut back on those opportunities, life is so much more pleasant. But what could you have done? Predicting the intraday movement of currency markets is hard, and there no reason to think that you, in your corporate treasury department, would be great at it. You're probably not even really trying: You're just buying dollars between doing other things, without giving any thought to picking the perfect minute at which to do it. Odds are that you'll be below-average, and so you'll do worse than the average price during the day. You'll go to your boss and tell her that you got done at $1.128, and she'll see that the price is now $1.1325, and she'll quietly judge you for not getting as many dollars as you could have. And you and your fellow corporate treasurers and mutual fund managers and so forth will come away from the foreign exchange markets with a feeling of sadness. (news.financializer.com). As reported in the news.