Chinese Association of Idaho State University (CAISU)
The foreign exchange market is a global financial market where one currency is exchanged for another.Forex is considered a decentralized or
Over the Counter (OTC) market. The forex market is the largest financial market in the world with an average daily turnover of more than $ 5 trillion. The main purpose of the forex markets is to facilitate international trade and investment.Currenciesthat has the highest transaction volume include US Dollar, Euro, Great British pound and Japanese Yen. Unlike stocks there are big numbers of participants in the forex markets comprising of Commercial companies, central banks, Hedge funds as speculators, Investment management firms, Retail Foreign exchange traders, on bank foreign exchange companies, Money transfer/remittance companies.
Commercial companies are one of the main participants in forex markets. These companies do actively trade currencies with an intention of growing their overall wealth and to create value for the shareholders who invest in them. Some of the commercial companies can be named as Deutsche Bank, UBS, Citigrioup, HSBC, Barclays and so on.
Central Banks play an important role in the foreign market. They try to control the money supply, inflation and interest rates by trading huge volume of currencies. They use their often substantial foreign reserves to stabilize the market. The central banks are able to stabilize the markets because Central banks do not go Bankrupt, if they make large losses. Some of the players are Reserve Bank of Australia, European Central Bank, Bank of Canada and so on.