HOW CAN THE PARITY BE CALCULATED?
Euro: 3 TL Dollars: 2 TL and Euro Dollars 3/2 = 1.5. In this case, the Dollar will be 2/3 = 0.66.
An investor who bought EURUSD (long position) will have sold USD in exchange for the EUR bought; sale (Short Position) will make it sell Euro and receive US Dollars.
EURUSD parity (Euro / US Dollar), USDJPY (American Dollar / Yen), GBPUSD parity (Sterling / US Dollar) and AUDUSD (Australian Dollar / US Dollar) are among the top paratels that are traded on Forex markets. In addition to these, the USDTRY parity (US Dollar / Turkish Lira) and EURTRY (Euro / Turkish Lira) are also included in Turkey.
The difference between the purchase price (ask) and the selling price (bid) of currency pairs / parities (the ratio of currencies) is called spread. The difference between buy-sell prices is measured in pips. Pip is the change on a piece of paper, and most parts represent the 4th step change (1 pip = 0,0001).
Forex spread ratios are not fixed because they are based on prices given by large banks and may decrease or increase according to market conditions.
A parity is a pair of currencies in which a country’s currency is valued against the currency of the other country. According to their prevalence in global markets, major and minor (exotic) parities are examined in two groups. The parallels traded most in global markets are called major. Another reason for the major denomination of these currencies is that country economies are robust and dynamic.
There are 7 major currencies that are traded on financial markets. These are Euro, US Dollar, Japanese Yen, British Sterling, Swiss Franc, Canadian Dollar, Australian Dollar. Minor currencies are currencies with lower transaction volumes, preferred by local investors.
The most preferred minor currencies are New Zealand Dollar, South African Randi, Singapore Dollar. Parity pairs consisting of one major currency and one minor currency are also called minor parity.
On the Forex market, every transaction on the parity occurs when a foreign currency is sold and other foreign currency is bought. According to this price, it is necessary to understand how much the counter currency should be paid to get one from the first currency. If the EURUSD is priced at 1.1090, EUR1.1090 will have to be paid to get 1 EURO. In the Forex market, investors aim to earn from price fluctuations of currency pairs by buying or selling other currencies in exchange for a foreign currency. The expectation of investors who want to buy the euro and make a profit increases the value of parity, but this situation is shaped by the multiplicity of supply and demand.
How is the parity calculated? We will clarify this question with the help of a sample;
EURUSD is calculated as: 3,2440 / 2,9220 = 1,1101.
There are many factors that affect the price of the parity. These are economic data, decisions of the Central Bank, political developments and geopolitical risks, which have a significant effect on the price of the currency. The increase in interest rates ensures that the growth figures announced on the anticipation or the value of the industrial currency are appreciated; Low employment, rising foreign trade deficits in emerging countries, or rising inflation lead to the devaluation of the money. The uncertainties in the political structure of the country and the loss of political confidence will cause the currency to lose value.
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