This essay DEFINITION of 'Foreign Exchange Market' has a total of 1073 words and 7 pages.
DEFINITION of 'Foreign Exchange Market'
DEFINITION of 'Foreign Exchange Market'
The market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world.
The foreign exchange market assists international trade and investments by enabling currency conversion. For example, it permits a business in the United States to import goods from the European Union member states, especially Eurozone members, and pay Euros, even though its income is in United States dollars. It also supports direct speculation and evaluation relative to the value of currencies, and the carry trade, speculation based on the interest rate differential between two currencies.
In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying for some quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions (the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states after World War II), when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of the following characteristics:
its huge trading volume representing the largest asset class in the world leading to high liquidity;
its geographical dispersion;
its continuous operation: 24 hours a day except weekends, i.e., trading from 22:00 GMT on Sunday (Sydney) until 22:00 GMT Friday (New York);
the variety of factors that affect exchange rates;
the low margins of relative profit compared with other markets of fixed income; and
the use of leverage to enhance profit and loss margins and with respect to account size.Advantages
The forex market is extremely liquid, hence its rapidly growing popularity. Currencies may be converted when bought or sold without causing too much movement in the price and keeping losses to a minimum.
As there is no central bank, trading can take place anywhere in the world and operates on a 24-hour basis apart from weekends.
An investor needs only small amounts of capital compared with other investments. Forex trading is outstanding in this regard.
It is an unregulated market, meaning that there is no trade commission overseeing transactions and there are no restrictions on trade.
In common with futures, forex is traded using a good faith deposit rather than a loan. The interest rate spread is an attractive advantage.
Back to top
The major risk is that one counterparty fails to deliver the currency involved in a very large transaction. In theory at least, such a failure could bring ruin to the forex market as a whole.
Investors need a lot of capital to make good profits because the profit margins on small-scale trades are very low.Functions of the Foreign Exchange Market:
The foreign exchange market performs the following important functions:
(i) to effect transfer of purchasing power between countries- transfer function;
(ii) to provide credit for foreign trade - credit function; and
(iii) to furnish facilities for hedging foreign exchange risks - hedging function.Like any other market, foreign exchange market is a system, not a place. The transactions in this market are not confined to only one or few foreign currencies. In fact, there are a large number of foreign currencies which are traded, converted and exchanged in the foreign exchange market.
Functions of Foreign Exchange Market:
Foreign exchange market performs the following three functions:
1. Transfer Function:
It transfers purchasing power between the countries involved in the transaction. This function is performed through credit instruments like bills of foreign exchange, bank drafts and telephonic transfers.
2. Credit Function:
It provides credit for foreign trade. Bills of exchange, with maturity period of three months, are generally used for international payments. Credit is required for this period in order to enable the importer to take possession of goods, sell them and obtain money to pay off the bill.
3. Hedging Function:
When exporters and importers enter into an agreement to sell and buy goods on some future date at the current prices and exchange rate, it is called hedging. The purpose of hedging is to avoid losses that might be caused due to exchange rate variations in the future.
Kinds of Foreign Exchange Markets:
Topics Related to DEFINITION of 'Foreign Exchange Market'
Essays Related to DEFINITION of 'Foreign Exchange Market'
Forest Policy In MalaysiaForest Policy in Malaysia Malaysia is among the countries in Southeast Asia which has experienced remarkable economic growth and industrialization in the past decade. It is unique in that its success is not a result of adopting any one model for development. Rather, Malaysia?s government identified its goals and sought to create a country-specific model of development suited to their needs for growth. An example of this is the Malaysian government?s increase in exports of manufactured goods rath
Causes Of The Great DepressionCauses of The Great Depression The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade. Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during
Comparative PoliticsComparative Politics Comparative Politics, typically defined as the study of the internal politics of nations other than our own, is a diverse and complex field. There is no one central tendency or approach which dominates this area of inquiry within political science: various theories, concepts, issues and methodologies are evident in the field. While it is recognized that no simple classification can be made of the literature, we are encouraged to be aware of contrasting approaches, and to eng
The 1930?s: The Good Times And The Bad TimesThe 1930?s: The Good Times and The Bad Times The decade of the 1930?s can be characterized in two parts: The Great Depression, and the restoration of the American economy. America had been completely destroyed due to the Stock Market Crash of 1929. It was up to the government and people of the 1930?s to mend America?s wounds. One man stood up to this challenge, Franklin Delano Roosevelt. He promised to fix the American economy, provide jobs, and help the needy. During The Great Depression, the
Sony And MarketingSony and Marketing WHAT MARKETING IS: The primary concern or objective of marketing is to identify and satisfy, or exceed the changing needs of customers. In view of this broad concern of marketing, it can be seen that the concept of marketing encapsulates many activities in a business. Marketing, in fact, refers to any activity undertaken by a firm that has been designed to plan, price, promote and distribute ideas, goods and services to target markets. These marketing activities were executed
World War IIWorld War II Michael Dominguez In the begging of the twenty-century a war was raged against the world. Every country fought to honor and defend it country. The Triple Entente, Germany, Austria-Hungary, and Italy versus the Allies, Britain, France, and America in an all out world war. Each county gathered its troops and raised their spirits high in the honor to defend one's nation. Germany was the first. They declared war on France. The French not willing to back down were at war. Germany now on
DEFINITION of 'Foreign Exchange Market'DEFINITION of 'ForeignExchangeMarket' DEFINITION of 'ForeignExchangeMarket' The market in which participants are able to buy, sell, exchange and speculate on currencies. Foreignexchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world. The foreignexchangemarket assists international trade and investments by enabl
Country Risk and Strategic Planning AnalysisCountry Risk and Strategic Planning Analysis Country Risk and Strategic Planning Analysis MGT 448 November 11, 2013 Country Risk and Strategic Planning Analysis Globalization is more of a necessity than an option in certain markets because of the potential for growth, but before investing abroad, the associated risks need to be known and understood. A country risk analysis can be used to avoid making a decision to expand an organization into a region that may result in financial disaster. Risks
Introduction to Sociology and Political SciencesRelationship Between China and Hong Kong Introduction to Sociology and Political Sciences Mid-term paper Name: Student ID: 81200158 Word count: 4337 words Topic Discuss the relationship between Hong Kong and mainland using concepts introduced in this course. Introduction Hong Kong, located at the southern coastal of China, fully shows the diversification of culture, with a mix characteristics of different backgrounds. Hong Kong is currently under the rule of the PRC as a special administrative r
Hk Special IdentityHk Special Identity Compared with other mainland cities or Taiwan, Hong Kongs politics has created a very special identity for the SAR especially after reunification with China (1997). Hong Kong was occupied as a Britishs colony for 150 years. During Hong Kongs colonial period, Hong Kongs politics are managed by Britishs officer. However, since Hong Kong was return to china in 1997, Hong Kong people are being Chinese national and a series of politics have significant changes. A new idea O
ECONOMICS Spring 2015 Exam 1ECONOMICS Spring 2015 Exam 1 Part A: Matching Write the correct letter for the statement on the line provided. 30 Points ____b__1. The study of how people use their scarce resources to satisfy their unlimited wants a. Private Property ___d___2. Limited productive resources to satisfy peoples unlimited wants b. Economics ___g___3. A business that is chartered by a state and legally operates apart from the owner or owners who organize or run it c. Entrepreneur __i____4. 2 or more people agree
International Human Resource ManagementEXECUTIVE SUMMARY International Human Resource Management (IHRM) is a method of selection,acllotication and utilizing of human Resourses in an international context. This report focuses on IHRM practices and the issues MURDOCH University faces in its IHRM strategies. The management of Global workforce policies and practices. Recruitment and Selection, training and perfomance management and renumeration process of Murdoch. MURDOCH University is regarded as a leading Australian and Global universi
International Human Resource ManagementEXECUTIVE SUMMARY International Human Resource Management(IHRM) can be defined as the methods of selecting, allocating, and utilizing human resources effectively in an international context. IHRM is the methods of selecting, allocating, and utilizing human resources effectively in an international context. MURDOCH is distinguished as a leading Australian and Worldwide famous university. To be successful, the university focuses on attracting, retaining and patronizing those educators who are dedi
Topics in Economic Analysis & PolicyTopics in Economic Analysis & Policy Volume 5, Issue 1 2005 Article 16 Price Discrimination and Smuggling of AIDS Drugs Copyright c 2005 by the authors. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, bepress, which has been given certain exclusive rights by the author. Topics in Econom
The Asian TigersThe Asian Tigers The Asian Tigers arrival into the world economy has been extraordinary. Hong Kong, Indonesia, Malaysia, Singapore, South Korea, and Thailand have experienced dramatic changes over the past 20 years. Their economies have fundamentally changed from traditional agriculturally based societies to rapidly growing newly industrialized nations. Their incredible rates of growth were accompanied by significant structural changes. While most of the change has been positive, from time to
Recruiting and selecting staff for international assignments109 Introduction Hiring and then deploying people to positions where they can perform effectively is a goal of most organizations, whether domestic or international. Recruitment is defined as searching for and obtaining potential job candidates in sufficient numbers and quality so that the organization can select the most appropriate people to fill its job needs. Selection is the process of gathering information for the purposes of evaluating and deciding who should be employed in particular job
A Detailed Research on Corruption in IndiaA Detailed Research on Corruption in India What is corruption? Corruption is a form of dishonest or unethical conduct by a person entrusted with a position of authority, often to acquire personal benefit.  Corruption may include many activities including bribery and embezzlement, though it may also involve practices that are legal in many countries.  Government, or \'political\', corruption occurs when an office-holder or other governmental employee acts in an official capacity for persona
The Lightweight Reflective Jacket The Lightweight Reflective Jacket By UNIQLO Europe Ltd. 7th December 2015 3242 words Table of Content Pages i. Executive Summary. 3 ii. Introduction. . 4 iii. Organization Background. 5 iv. Environmental Analysis. ...... a. PESTLE Analysis . 8 b. SWOT Analysis 10 v. Marketing Objective ..... 12 vi. Marketing Strategy (STP). 13 vii. Marketing Mix.
COMPANY ASSIGNMENT 2015The plummeting price of oil is still the biggest energy story in the world. The oil price has fallen by more than 40% since June, the price of Brent crude as in Diagram 1.This comes after nearly five years of stability. At a meeting in Vienna on November 27th the Organisation of Petroleum Exporting Countries (OPEC), which controls nearly 40% of the world market, failed to reach agreement on production curbs, sending the price tumbling. Also hard hit are oil-exporting countries such as Russia (wh
DECLARATION OF FITNESS TO SIT EXAMINATION PLEASE DETACH AND HAND IN THIS PAGE SEPARATELY DECLARATION OF FITNESS TO SIT EXAMINATION Students must complete the information below. Please refer to the front of your examination paper for further information. School (please tick one) Business School ό Law School Programme BSc Business Management Examination Portfolio Management Date 01/05/2015 Name Qadeer Niazi I am not aware of any medical or other extenuating circumstances that would impair my performance in this examination Signature Q.Ni
Smart CitiesMinistry of Urban Development Government of India June 2015 Smart Cities Mission Statement & Guidelines Government of India Ministry of Urban Development (June, 2015) Contents 1. The Challenge of Urbanization 5 2. What is a smart city 5 3. Smart City Features 7 4. Coverage and Duration 7 5. Strategy 8 6. Proposal Preparation 9 7. Smart Cities Selection Process 10 8. How Many Smart Cities in Each State/UT? 11 9. The Process of Selection of Smart Cities 11 10. Implementation by Special Purpose V
The aggregate supply curve: The aggregate supply curve: Is explained by the interest rate, real- balances,and foreign purchases effects. gets steeper as the economy moves from the top of the curve to the bottom of the curve. β¨ shows the various amounts of real output that businesses will produce at each price level Β is downsloping because realpurchasing power increases as the price level falls Growth is advantageous to a nation because it: Β promotes faster population growth. β¨ lessens the burden of scarcity. β¨ eli
Introduction Introduction The company I have chosen for this topic is the Coca-Cola Company. The Coca-Cola Company is the world's largest beverage company, refreshing consumers with more than 500 sparkling and still brands and nearly 3,900 beverage choices. Led by Coca-Cola, one of the world's most valuable and recognizable brands, the company's portfolio features 21 billion-dollar brands, 19 of which are available in reduced-, low- or no-calorie options. These brands include Diet Coke, Coca-Cola Zero, Fant
Lecture #1 Lecture #1 Introduction: What is the Third World? Nations Unaligned with Either NATO or the Warsaw Pact βWon't work; could include Yugoslavia and even the People's Republic of China The Decolonizing World βWon't work; must include Egypt, Thailand, and other nations that were never colonies The Developing World βWon't work; misleading in terms of power dynamics and ethnocentric The Global South βWon't work; could include Australia and New Zealandβand Antarctica! The Dominoes βDomi
My major work to Conduct quantitative analysis of My major work to Conduct quantitative analysis of financial data to forecast revenue, identify future trends and identify risk associated wi x th capital expenditure, acquisitions, and joint-venture projects.Β For this purpose i worked with R and tableauu. ia slo dod ad hoc anlysis and reporting,i did it preferably on tableau beacuse A few possibilities things you should be familiar with: understand what is a chart of accounts is, how costs are allocated at a high level and how costs roll up a
S ubject Outline S ubject Outline Subject Name : Financial Institutions and Markets Subject Code: BX2032 . Study Period: SP 5 2 , 201 7 Study Mode: Internal Campus: Singapore Subject Coordinator: M r Richard Kent Subject Lecturer : D r T Y Thong Pre-requisites: BU 1003 https://secure.jcu.edu.au/app/studyfinder/?subject=BU1003 OR EC 1005 https://secure.jcu.edu.au/app/studyfinder/index.cfm?subject=EC1005 year=2010 EC 1001 https://secure.jcu.edu.au/app/studyfinder/index.cfm This subject outline has been prepared b
William Shakespeare William Shakespeare William Shakespeare (baptised 26 April 1564 - 23 April 1616)[a] was an English poet and playwright, widely regarded as the greatest writer in the English language and the world's pre-eminent dramatist. He is often called England's national poet and the Bard of Avon (or simply The Bard). His surviving works consist of 38 plays 154 sonnets, two long narrative poems, and several other poems. His plays have been translated into every major living language, and are performed
Foreign relations of East TimorForeign relations of East Timor Relations with specific countries and regions Association of Southeast Asian Nations Countries with embassies in East Timor Countries with East Timorese diplomatic missions Main article: Accession of East Timor to ASEAN East Timor is the only country in Southeast Asia that is not a member of Association of Southeast Asian Nations (ASEAN). East Timor also does not hold observer status in the group. However, East Timor has expressed its intention of gaining observer
Bill Bowerman and Phil Knight first founded Nike Inc.Bill Bowerman and Phil Knight first founded Nike Inc. in 1964 as Blue Ribbon Sports. In 1971, it was re-named Nike after the Greek winged goddess of victory, strength, speed, glory, and fame. The Nike swoosh is meant to represent the wings of the goddess Nike, as she was often depicted in mythology with. The iconic swoosh was created by Caroline Davidson, an advertising student at Portland University. She was a freelancer asked to design a graphic logo that could fit on the side of a shoe