Paper Topic:

Froegin exchange summary

FOREIGN EXCHANGE

Running Head : Foreign Exchange

FOREIGN EXCHANGE

In APA Style (name (university

2007

Foreign Exchange

Introduction

International trade has become a natural part of business today Businessman , companies and countries cannot survive economically without the help of parties outside national boundaries . In light of this condition , the role of international cooperation , especially in terms of economic , has become very important . In this , we are discussing the foreign exchange market as a tool that facilitates international trade Foreign Exchange Markets and Their Roles

Foreign exchange

(forex ) market is by far the largest market in the world in terms of economic circulation . The average value of transactions in the forex market already exceeds US 1 .9 trillion /day today . The number is predicted to grow continuously . It involves transaction between large banks , governments , multinational corporations , financial institutions , central banks and even individual currency speculators (Millman , 1995

The foreign exchange market is simply a market exists wherever a currency is traded for another . Therefore , it has no single exchange center that acts as a clearing house . The international forex transactions however , are quite concentrated in nature . 73 of the global forex transactions occur in only 10 of the most active nations in forex trade . The largest geographic trading center is in United Kingdom The United Kingdom has a global share of forex transactions that exceeds 30 in 2006 . Other large geographic center of forex transaction is in the United States , where more than 18 of global share of forex transactions occurs . Next is Japan , with more than 7 of the global forex . Transactions , and Singapore , with about 6 share of the global forex transactions (Millman , 1995

Generally , the role of the world 's major forex markets as mentioned above is no other than to accommodate and determine exchange rate . In those forex markets , exchange rate is determined through basic principles of supply and demands , or in other words , exports and imports . The markets create the principal rate-setting mechanism in currency exchanges . In other words , the act as a facilitator which allows and protects the system where supply and demands dictates the value of currencies

Besides this principle role however , the foreign exchange markets also have other functions . They act as a medium of investment , whether they are in the form of speculation of hedging and they also act as an efficient channel to obtain or disposing foreign currencies . Because of these roles , most of the world currencies are affected by the forex market

There are various factors that affected the forex markets and how it determines the value of all currencies involved . Some of those factors are

Economic factors

In the forex markets , currencies are influenced by economic policies and economic conditions . Economic policies include fiscal policies and monetary policies . Governments can attempt to influence the value of their currencies by changing their budgetary practices or by changing the supply and `cost ' of money . Economic conditions on the other hand includes : government budget deficits or surpluses , trends and balance of trade...

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