Arkiv | april 2021

What is the foreign exchange market?



Currency is traded on the foreign exchange market. Currency is very important to most people in the world, whether they realize it or not, the currency must be converted into business and foreign trade. You live in the United States and want to buy cheese from France, or you or the company you buy cheese must pay France for cheese in Euros (EUR). The US dollar (USD) equivalent to the euro. The same goes for travel. French tourists in Egypt cannot pay euros to visit the pyramids because it is not the local currency. Therefore, the visitor must convert the euro to the local currency at the current exchange rate, in this case, the Egyptian pound. A unique aspect of this international market is the lack of a central foreign exchange market. It can be done electronically without a prescription (OTC). This means that all transactions are conducted through computers between merchants around the world, rather than through a central exchange point. The market is open 24 hours a day, every Monday, Friday, and a half, and currencies are traded globally in major financial centers in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney. Almost any time zone. This means that the Tokyo and Hong Kong foreign exchange markets will start again after the end of the US trading day. Therefore, the foreign exchange market can be very active at any time of the day, and quotes are constantly changing. In other words, the foreign exchange market as we know it today is a truly new market. Of course, in the simplest sense, people have been using the currency of the country to mint coins ever since people converted one currency to another for economic benefits. However, the modern money market is a modern invention. After the signing of the Bretton Woods Agreement in 1971, more major currencies were allowed to circulate freely. The value of each currency is different, which leads to the need to provide foreign exchange services. Foreign exchange and investment banks and commercial banks conduct most transactions in the foreign exchange market on behalf of their clients, but for professionals and individual investors, there are also speculative ways to trade one currency with another. The ways institutions, companies, and individuals conduct currency transactions are the spot market, the futures market, and the futures market. The spot market has always been the largest market because it is a truly good product ”basic” than the market. In the past, the futures market was a favorite destination for traders because it was available to individual investors. However, with the emergence of e-commerce and the emergence of many foreign exchange brokers, the trading volume of the spot market has surged, and it has become the preferred trading market for individual investors and speculators, and its performance has exceeded the futures market . In the foreign exchange market, they usually refer to the spot market. Futures and futures markets are more popular among companies that need to hedge exchange rate risk before a certain date in the future. Especially in the spot market, currencies are bought and sold at current prices. Supply and demand reflect many factors, including current interest rates, economic performance, attitudes to the current political situation (local and international), and perceptions of the future performance of one currency relative to another. After the transaction is completed, this is called a ”spot transaction.” This is a two-way transaction in which one party transfers the agreed amount of currency to the counterparty and receives a certain amount of another currency at the agreed exchange rate. After completing the position, you will be charged a cash fee. The spot market is often referred to as the current (rather than future) market for processing business. These transactions will take two days to complete. Contrary to the spot market, futures and futures markets are not traded in real currencies. The contract stipulates the requirements for a specific type of currency, unit price, and future billing date. In the futures market, over-the-counter contracts are bought and sold between two parties, and the two parties define the terms of the contract between them. In the futures market, futures contracts are bought and sold on the public commodity market (for example, the Chicago Mercantile Exchange) based on standard sizes and settlement dates.



Det här inlägget publicerades 25 april 2021 i fx market och taggades .