is FOREX (Foreign Exchange) ?
The foreign exchange
market is the arena in which currencies of one country are
exchanged for those of another and where settlements are made
for international business.
- FOREX is the trading
of one currency to another e.g. US Dollar to Japanese Yen
- Approximately 1.5
Trillion US dollar is exchange with or by different
currencies a day
- Banks – both
commercial, private, merchant and investment banks, together
with insurance companies; fund offices; investment and
financial institutions all participate actively or passively
in the FOREX market.
- FOREX trading may
not just involve with physical exchange but also done
electronically amid banks or brokerage houses which are not
bound to one location only.
Banks and other
financial institutions are all involved in FOREX trading.
Payments for import and export flows through the FOREX market as
do payments for international purchases and sales of asset.
investment need also require the FOREX trading . For example a
Japanese investor would like to buy stock shares in USA will go
through the FOREX market to buy USD to pay the broker who sold
the shares to him.
have large financial exposures to overseas will involve in FOREX
trading to hedge the risks due to the currency movements and
fluctuations. A typical example will be the monetary crisis that
happened this lately. Any company that participate in the FOREX
trading for hedging their asset should be able to minimize their
risks and should be even able to escape from the crisis.
The role of Banks
in the FOREX trading is to facilitate transactions between
different parties such as company, wishing to exchange
However, banks are not
the only FOREX traders. The most successful traders, such as
George Soros, speculate in FOREX.