According to the world- wide central banking organization which is the Bank for International Settlements, the amount of daily trading done in the forex market is more than three trillion US Dollars. Thus the trading amount is so much that it is much larger than all of the US stock markets taken together. Here, trading from the whole world is done with or without the involvement of hard cash.
The trading begins in Sydney everyday, and moves first to Tokyo followed by London and then New York as the business day start in every financial sector. The exchange rates are shown around the world continuously on the computer.
The trading takes place when any trader quotes a price for any currency on his machine, and then anyone in the word willing to trade at that particular price can reply to that message and trade. Thus the buyer and sellers can be from any country and virtually trade with other without being present at any particular. The trading takes place between three continents which makes it possible to react or change any decision by any trader regarding his trading activity any event or activity. The value of a particular currency relative to other currencies is influenced by many factors but the main factor affecting it is pure supply and demand of the market. If the demand rises or supply falls, it results in price rise or price fall respectively.
1. DEALING ROOM-ORGANIZATIONAL STRUCTURE:
Its organization consists of two tiers namely the retail tier and the wholesale tier.
In the retail tier, trading in forex is done by the small agents whereas in the wholesale tier, the dealings between dispersed and diverse banks and big financial institutions , multinational corporations take place.
In the forex market, the traders and the individuals have different access levels unlike the stock market, where every client can access the same price of stocks like the other participants or individuals. Whereas in the forex market, on the top level, there is the biggest investment banking firms like Citi and Deutsche Bank. At this level, where the difference between
The foreign exchange is the value of the currency of one country determined in the currency of another country. It can also be defined as the relative price of two different currencies.
"The foreign exchange market is not a physical institution where the traders meet, transactions are made by telephone and computer rather than face to face" ( Winters Alan, 1991).
It has traditionally performed the role of converting one currency into another (Madura, 2009). It is consistent with the principles of market economy laid down by Adam Smith, according to which the value or price of a currency is determined by the market forces of demand and supply.
The Bretton Woods agreement was developed in New Hampshire in 1944. The major outcomes of the agreement were the formation of an International Monetary fund. The system proposed the introduction of a pegged foreign monetary exchange rate system that was adjustable.
While the notes referring to, deals with legal document that compels a borrower to repay a mortgage loan at a specified interest rate for a specific period time, which is also called 'Promissory notes'. Additionally, 'Checks' means a negotiable instrument drawn against deposited funds, to pay a specified amount of money to a specific person upon demand, such like bill of exchange and draft.
No doubt, our reading of the latest literature leads us to terminate that, in difference by the profession's consensus scrutiny of the 1980s, official intervention can be effectual, particularly from side to side its role as a signal of policy intentions, and particularly when it is publicly proclaim and concerted.
Manufacturing operations in a country with highly unstable foreign exchange is ultimately exposed to foreign exchange risk. The depreciation or appreciation of exchange rate in any of the two countries, the domestic as well as international market, would have a significant impact on the firm's revenues and future cash flows.
The stakes involved with investments as posed by the currency vacillations have escorted many finance investment mediums to loan mostly in dollars and Euros (Young et al, 2008). Whilst this run through of escorting in crucial currency defends the investors, it budges the Foreign Exchange stakes to the finance organizations that implement the hard currency liabilities to fund the portfolios of the loans denominated in its domestic currency (Young et al, 2008).
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According to the research findings, the foreign exchange market is a decentralized interaction between buyers and sellers of currencies that determines the relative worth of currencies. It would be impossible to have foreign trade and investment without the existence of such markets that facilitate the conversion of one currency into another.
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