Professional Documents
Culture Documents
Foreign Exchange: Prepared by Jasmine. V
Foreign Exchange: Prepared by Jasmine. V
Prepared by Jasmine. V St. Josephs College of Business Administration 22nd October, 2013.
Introduction
The paper explains Foreign Exchange System in a brief. It covers the main elements of Foreign Exchange market, its characteristics, and its functional mode. It also mentions the inception along with a description of certain important terms involved in Foreign Exchange. The conclusion highlights the Foreign Exchange systems in a simple way, putting up the roles of Forex altogether.
Learning
Foreign Exchange / Forex is a global exchange system which deals with currencies. Its a mode of currency exchange which covers all the countries and includes many financial institutions, governments, people, goods, services and banks as the main players. International trade is facilitated only through foreign exchange. Any transactions across the countries will be linked to Foreign Exchange market.
International Banks are the main participants in Foreign Exchange. These banks will be using many financial institutions, who act as Dealers and involved in large quantities of currencies trading. These institutions work throughout without any weekends exception. In a foreign exchange transaction, a party purchases one currency by paying another currency. Forex formed during 1970s, when gradually switched to floating exchange rates from the previous exchange rate regime. Exchange rate regime remains fixed as per the Bretton woods system. This was the system followed uptil before World War II.
Characteristics of Forex:
It represents the largest asset class, in terms of the high liquidity involved Its geographical dispersion Its continuous operation, 24*7 The variety of factors affecting Exchange rates Low margins in the profits, compared to other markets of fixed income The use of leverages, to enhance profit and loss margins and w.r.to account size.
Conclusion
Forex helps the international trade and investment by enabling the currency conversion. It could be referred as the Ideal market of perfect competition, since no currency intervention is faced by any central banks. Due to the large and liquid currency markets, they are the most efficient financial markets. Forex is not a single exchange, but it is a network participants from all parts of the world.
References
http://en.wikipedia.org/wiki/Foreign_exchange_market
http://en.wikipedia.org/wiki/Foreign_exchange
https://www.google.co.in/search?q=foreign+exchange+meaning&oq=foreign+exchange+me&aqs=c hrome.1.69i57j0l5.6330j0j1&sourceid=chrome&espv=210&es_sm=93&ie=UTF-8
http://www.investopedia.com/terms/f/foreign-exchange.asp
http://www.investopedia.com/terms/forex/f/foreign-exchange-markets.asp