What is FOREX (Foreign Exchange) ?
  • 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.
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. 

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. 

Besides, 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. 

Companies that 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 currencies. 

However, banks are not the only FOREX traders. The most successful traders, such as George Soros, speculate in FOREX.

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