The foreign exchange market, or FX as it is
widely known, is the largest trading market in
the world by volume.
2 Thibaut De Roux
The foreign exchange rate is determined by this
market and it is where all transactions involving the
exchanging of currencies take place.
An Introduction to the
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The FX market
and the wider
is in the process
of being altered
International investments and trade are
assisted by the FX market as it enables
currency conversion. Typical transactions
involve one party purchasing a specific
quantity of a currency using a relevant
quantity of another currency. As an exa-
mple, this means that a business in one
country can import goods from another
country, even where the importing bu-
siness operates using a different currency
to the exporter.
Exchange rates are set based on activity
within the FX market and are dependent
on a number of factors. These include rela-
tive purchasing power parity, asset prices
and balance of payment models. The FX
market operates a floating exchange rate,
unlike a fixed exchange rate which is set by
the relevant government.
More on this
topic can be found
by visiting the blog of
Thibaut de Roux.