Establishing Market Rates
To establish market rates, use the Market Rates component (RT_RATE_PNL).This section discusses how to define market rates, establish rate definitions and maintain exchange rates.
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Page Name |
Definition Name |
Usage |
|---|---|---|
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RT_RATE_PNL |
Enter and maintain market rates. The rates are effective-dated, which enables you to track them as they change over time. |
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RT_RATE_DEF_SEC |
View or change rate definition rates. |
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EXCH_RT_DTL |
Display the rules to use to calculate exchange rates. You can modify the rate values. |
Use the Market Rates page (RT_RATE_PNL) to enter and maintain market rates.
The rates are effective-dated, which enables you to track them as they change over time.
Navigation:
Enter the rate as of the effective date. The Rate field displays the visual rate or, in the case of triangulated exchange rates, the primary visual rate. The visual rate is typically the cross rate, but it can also be one of the other component rates of the triangle.
You can edit the rate for non-triangulated rates and for triangulated rates if a quotation method has been defined for the currency pair and you select the Cross-Rate Allow Override check box on the Currency Quotation Method page. If an override is not allowed, you can update the exchange rate values to and from the reference currency on the Exchange Rate Detail page.
Changing a Triangulated Cross Rate
If you change a triangulated cross rate, the system recalculates one of the component rates. This can result in the cross rate being recalculated that is slightly different from the one that you entered. For example, you start with a triangulated rate of RM=6.80000000 and RD=1.25000000 for a cross rate of 5.44000000. If you change the cross rate to 5.43550000:
The system first recalculates RD = 1.25103486.
The system then recalculates the cross rate to 5.43550001 based on the first recalculation.
In rate maintenance, you have no choice but to accept the recalculation. However, in a situation such as journal entry, a warning message gives you the opportunity to override triangulation and to use the exact rate that you entered, which results in the rate being stored as RM=5.43550000 and RD = 1.
This graphic represents the three component visual rates in an exchange rate from USD to a euro participating currency (EPC), triangulating through the EUR.
Sample component visual rates
Display all three visual rates of a triangulated exchange rate by clicking the icon next to the Rate field to open the Exchange Rate Detail page.
You can edit the Rate field except when all of these conditions are true:
The rate is triangulated.
The primary visual rate is the cross rate.
The Allow Overridecheck box on the Currency Quotation Method page is deselected for the exchange quotation method for the rate.
Note: Typically, you do not maintain triangulated exchange rates online. Instead, maintain the rates of the From currency to the Reference currency and the Reference currency to the To currency, then run the Cross-Rate Reciprocal SQR (EO9030.SQR) to define the triangulated exchange rates.
Reciprocal Currency Pairs
If a quotation method has been defined for the currency pair and if the Auto Reciprocate check box is clicked, creating or maintaining a rate for a currency pair automatically creates or updates the rate of the reciprocal currency pair. For example, if you change the USD to GBP rate, the GBP to USD rate automatically updates. You can only automatically reciprocate currency pairs for which quotation methods have been defined.
If a rate definition does not already exist for the currency pair, one will be automatically created with the default values of 2.5 percent maximum variance and Warning message processing.
Use the Rate Definition page (RT_RATE_DEF_SEC) to view or change rate definition rates.
Navigation:
Click the Rate Definition link on the Market Rates page.
Field or Control |
Description |
|---|---|
Maximum Variance |
You can modify the maximum variance—the percentage of variance allowed when you maintain the market rate. If the change exceeds the tolerance, an error results. The default value is 2.50 (2.5 percent). |
Error Type |
You can modify the type of error that results when the tolerance defined in the Maximum Variance field is exceeded during data entry. Error Type values are: None: No error processing occurs. The new rate is used even though it exceeds the limit. Stop: Processing halts. The system prevents you from saving the new rate. Warning: A warning appears. You can ignore it and save the new rate. |
Note: The results of changing the rate definition do not take effect until you save the Market Rates page.
Use the Exchange Rate Detail page (EXCH_RT_DTL) to display the rules to use to calculate exchange rates.
You can modify the rate values.
Navigation:
Click the Exchange Rate Detail icon on the Market Rates page. This page can also be accessed from multiple pages in other applications.
The read-only fields include:
Field or Control |
Description |
|---|---|
Rate Quotation Basis |
Displays the quotation basis for the exchange rate as it is defined on the Currency Quotation Method page. If no quotation method is defined, the quotation basis is Direct |
Quote Units |
Displays the quote units for the exchange rate as defined on the Currency Quotation Method page. If no quotation method is defined, the quote unit is 1. |
Triangulate |
Displays the triangulated setting for the exchange rate as it is defined on the Currency Quotation Method page. If no quotation method is defined, the triangulated setting is N. |
Reference Currency |
Displays triangulated exchange rates only, and shows the reference currency used in the triangulated exchange. |
Current Quote |
Displays the current exchange rate used to convert the From currency to the To currency. A direct, non-triangulated rate shows quote units (or 1) on the left side of the equal sign and the visual rate on the right. For example: 1 USD = 1.40000000 CAD. A triangulated rate displays two component rates of the triangle: the rate for converting the From currency to the Reference currency, and the rate for converting the Reference currency to the To currency. For example, for a direct rate quotation basis, USD to a euro participating currency (EPC) involves triangulation as follows:
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Historic Quote |
Displays a quote to indicate the quotation method originally used by a historic exchange rate if the system determines that the original quotation method of the historic rate differs from the current quotation method. This field displays the following values:
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Exchange Rate |
Displays a single visual rate for non-triangulated exchange rates or displays all three component visual rates for triangulated exchange rates. The cross rate for triangulated exchange rates is editable only if the Allow Override check box is selected in the exchange quotation method definition for the rate. |