Foreign exchange markets as a whole play a major role in the growth and expansion of industrial globalization and international trade as a whole. The foreign exchange markets allow corporations to do business anywhere in the world in countries where the local currency is different to their own…
For corporations the four main roles of the foreign exchange markets are: currency conversion, currency hedging, currency speculation and currency arbitrage (Madura, 1992). Currency conversion is one of the most used functions of the exchange for corporations trading or doing business internationally. Entities use the exchange to convert one currency to another. From the purchase of finished goods or raw materials from foreign suppliers to being able to sell your product or service internationally being converting one currency to another efficiently is paramount to global business. The foreign exchange quotes two rates the spot and forward rate prices. The current daily exchange rate between two currencies is called the spot exchange rate (Bodie & Kane & Marcus, 2002). It is used for immediate payments or financial transactions. The value of any currency is realized by the interaction between the demand and supply of a currency relative to the demand and supply of other currencies. It is a dynamic market where rates are constantly changing based on the volume of activity for any given currency. Since a lot of business transactions do not require payment until a later date, the forward exchange rate provides a currency exchange rate for 30, 60 and 90 days. ...
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(Foreign Exchange Markets and Globalization Essay)
“Foreign Exchange Markets and Globalization Essay”, n.d. https://studentshare.net/other/20361-foreign-exchange-markets-and-globalization.
The globalization of the financial markets is going to cause a number of issues for many stock exchanges and force a number of changes which are not necessarily supported by the current infrastructure. There are a number of ways in which financial markets are going to need to respond to the changes in technology leading to globalization.
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.
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The purpose of this study is to examine the impact of the integration of worldwide capital markets on the economic growth and development of developing countries like India. Post liberalization the foreign capital inflows in the form of foreign portfolio investment (FPI) has improved liquidity conditions in the Indian capital markets.
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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