Forex Trading Glossary, Letter "I"


IMF - "IMF" stands for, the International Monetary Fund, which was established in 1946 to provide international liquidity on a short and medium term and to encourage the liberalization of exchange rates. The IMF supports countries with balance of payments problems - with the provision of loans.

IMM - International Monetary Market, part of the Chicago Mercantile Exchange, that lists a number of currency and financial futures' implied volatility. A measurement of the market's expected price range of the underlying currency futures based on the traded-option premiums.

Implied rates - This is the interest rate determined by calculating the difference between spot and forward rates.

Indicative quote - This is a market maker"s price, which is not firm.

Inflation - This is a continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Initial margin - The margin required by a Foreign Exchange firm to initiate the buying or selling of a determined amount of currency.

Interbank rates - "Interbank rates" are the bid and offer rates at which international banks place deposits with each other. The basis of the interbank market.

Interest arbitrage - "Interest arbitrage" is switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from a foreign currency into the local one or outward, i.e. from the local currency to the foreign one.

Sometimes better results can be obtained by not selling the forward interest amount. In that case, some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.

Interest parity - One currency is in "interest parity" with another, when the difference in the interest rates is equalized by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese yen against sterling would bring about interest parity.

Interest rate swaps - Is an agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows, whether payments or receipts are exchanged.

Internationalisation -"Internationalisation" refers to a currency that is widely used to denominate trade and credit transactions by non-residents of the country of issue. U.S. dollar and Swiss franc are examples.

Intervention - "Intervention" is an action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

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