Foreign Exchange as a Financial Market
Let’s learn about Foreign Exchange as a Financial Market. Currency exchange is very attractive for both the corporate and individual traders who make money in the foreign exchange markets.
The following features make this market different as compared to all other sectors of the world financial system
- Heightened sensibility to a large and continuously changing number of factors
- Accessibility to all traders in the major currencies
- Guaranteed quantity and liquidity of the major currencies
- Increased consideration for several currencies, round-the clock
- Business hours which enable traders to deal after normal hours or anytime
- National holidays in their country finding markets abroad open and
- Extremely high efficiency relative to other financial markets
The foreign exchange market is a global decentralized or over-the-counter market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined prices.
The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. Since currencies are always traded in pairs, the foreign exchange market does not set a currency’s absolute value but rather determines its relative value by setting the market price of one currency if paid for with another. Ex: US$1 is worth X CAD, or CHF, or JPY, etc.
