Currency Trading
A foreign exchange market exists whenever one currency is traded for another. It is the largest financial market in the world. It is mainly dominated by large banks, multinational cooperation and governments. Every country manages its currency with respect to foreign currencies and the foreign exchange market. It is known as Exchange Rate Regime.
Working of foreign exchange market
Currency prices are result of supply and demand forces. Currency become valuable when demand for it is greater than available supply. The ever changing current events have high influence on the foreign exchange market. The factors that affect the foreign exchange rate are economic factors, political conditions and market psychology. Internal, regional and international political events and conditions have impact on currency markets. The economic factors that affect are government fiscal policy and monetary policy and economic conditions. The most common regime today is the floating rate. The market decides the movement of exchange rates. Dollar Euro, Yen etc are examples of float currencies. Companies which do international business with different currencies face financial risk due to fluctuating rate it is called foreign exchange risk.
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