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Montarde

Can someone tell me what cutting basis points mean in forex? How it can affect the currency trading?

over 5 years ago

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ForexGump

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% or one percent of one percent. Cutting of basis points in forex refers to the cuts made by the central bank in its target interest rates. For example, if the Fed cuts its interest rate by 25 basis points, it means that the interest rate was cut by 0.25 percentage points. If rates were at 2.50%, and the Fed slashed them by 25 basis points, the new interest rate would then be 2.25%.A cut in the interest rate makes investment in that particular country less attractive. Demand for those investment instruments (treasuries, etc) would slacken as a result. Demand for the currency where those instruments are denominated will also be duller. In other words, any cut in the interest rate would be bearish for that particular country's currency.

over 5 years ago

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Ocampo

A basis point is used in terms of interest rates and it is the smallest quantity used in stating the return on fixed income products which is equal to 0.01%. As interest rates emerge it can bring a positive effect in the currency.

over 5 years ago

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