We here at Exchange Rate News naturally mention the foreign exchange markets on a regular basis, but what exactly is the foreign exchange market? This guide will tell you all you need to know.
What is the Foreign Exchange Market?
The Foreign exchange market or (FX, Forex or currency market) is the market used to exchange and trade international currencies. Financial organisations from across the globe act as traders between a vast variety of buyers and sellers, from massive businesses to holiday makers. The market operates around the clock every day except for the weekends. The market determines the value of the world’s differing currencies and is a vital part of international trade and investment. Companies such as foreign exchange experts TorFX deal in this market.
This is the process that allows modern day international trade to be possible. If a company in the United States wants to import goods from the UK, it has to pay in Pound Sterling even though its own income is in US Dollars. In a typical exchange, one party buys a quantity of a currency by paying a quantity of another currency. Various factors influence the value of currencies ranging from Government policy, economic factors such as recessions and consumer confidence.
Size of the Foreign Exchange Market
The foreign exchange market is massive and is continuing to grow with the daily turnover of over a massive $3.98 trillion. The UK handles up to 36% of all transactions making the country the most important foreign exchange centre in the world.
The foreign exchange market is one of the most fluid markets in the world as it is constantly changing.