Explain an example currency deal. Example 1 - deal between USD and JPY
An investor has a margin deposit of USD 10,000.

The investor expects the US dollar to rise against the Japanese Yen and therefore decides to buy USD 200,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.

The exchange rate is 119.055 -119.060. The investor buys USD at 119.060.

Day 1: Buy USD 200,000 vs JPY 1.5520 = Sell JPY 23,812,000.

Four days later, the dollar has actually risen to JPY 121.05 and the investor decides to take his profit.

Day 5: Sell USD 200,000 vs JPY 121.05 = Buy JPY 24,300,000.

As the dollar side of the transaction involves a credit and a debit of USD 200,000, the investor's USD account will show no change. The JPY account will show a debit of JPY 23,812,000 and a credit of JPY 24,300,000.

This results in a profit of JPY 488,000 = approx. USD 4,031.39 profit on the deposit of USD 10,000.

Example 2 deal between USD and CAD
An investor believes the Canadian dollar will strengthen against the US dollar in the long term.

Day 1: Sell USD 100,000 vs CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 153,570 for Day 61 due to the interest rate differential.

After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.