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THE FOREIGN EXCHANGE MARKET (Central banks and treasuries use the market…
THE FOREIGN EXCHANGE MARKET
The foreign exchange market consists of two tiers :!!:
the interbank or wholesale market :check:
and the client or retail market :check:
There are plenty of participants in the Forex. :!!:
Dealers in the foreign exchange departments of large international banks often function as market makers. :silhouette:
Participants in commercial and investment transactions, for example importers and exporters, international portfolio investors, multinational firms, tourists etc. :silhouette:
Dealers in the foreign exchange departments of large international banks often function as market makers. :silhouette:
Some of these participants use the foreign exchange market to hedge foreign exchange risk. :!!:
Speculators seek all of their profit from exchange rate changes. :silhouettes:
Arbitragers try to profit from simultaneous exchange rate differences in different markets. :silhouettes:
Central banks and treasuries use the market to acquire or spend their country's foreign exchange reserves as well as to influence the price at which their own currency is traded :!!:
It is a broker's business to know at any moment exactly which dealers want to buy or sell any currency. :silhouettes:
Foreign exchange dealing is the exchange of the currency of one country for the currency of another. :silhouettes:
Foreign exchange brokers are agents who facilitate trading between dealers. :silhouettes:
The basic idea of foreign exchange dealing is making profit on selling and buying currencies. :silhouettes:
The recent volatility of foreign exchange rates has given rise to a number of techniques to deal with currency risk. Among such hedging instruments are currency options, currency futures contracts and currency swaps. In the event customers do not know when they will need foreign currency, an option forward contract is frequently used. :!!:
“A call” is an option to buy, and “a put” is an option to sell.
A currency option is a contract that grants the holder the right, but not the obligation, to buy or sell currency at a specified exchange rate during a specified period of time
Currency futures contract is a futures contract to exchange one currency for another on a specified date in the future at a price (exchange rate) that is fixed on the purchase date