The Forex market is the largest and most liquid market in the world. Check out this power point presentation which lists down various important information on foreign exchange and who uses this platform.
2. About Foreign Exchange
Basically, the Forex (Foreign Exchange) market is
where banks, businesses, governments, investors and
traders come to exchange and speculate on currencies.
The Forex market is the largest and most liquid market in
the world. Here is a little more about foreign exchange.
3. Foreign Exchange Market
• In today’s global market place, foreign exchange plays a
significant role: 4 trillion US dollars’ worth of currency is
exchanged on a daily basis
• Prices available 24 hours a day, 7 days a week
• No formal exchange for currencies. Trading is done over the
counter in an interbank market and via brokers
• In this highly dynamic environment, global presence,
extensive footprint, and local knowledge are characteristics to
look for in your trade bank
4. Who Uses Foreign Exchange?
• Importers/Exporters - Importers pay in the foreign currency,
exporters receive payment in foreign currency
• Multinational corporations - Multinationals fund foreign
subsidiaries and funds are repatriated back to parent companies
• International investors - International investors hedge interest
payments with forwards
• Tour operators - Tour operators book foreign travel in the local
currency
• Schools - Schools make and receive tuition payments in foreign
currency
5. Bottom Line
• Hedging can eliminate the uncertainty of the forex rate that will
be used by a company in the future
• A foreign exchange forward contract allows a company to pay or
receive foreign currency in future at an exchange rate that is
agreed upon today
• By locking in the rate, a company can protect profits margins
and eliminate uncertainty of the value of cash flows
• A company can know exactly how many US dollars they will pay
or receive in the future; thus, they can better forecast their
business’ cash flow cycle and plan operations accordingly