The foreign exchange market is the most liquid financial market in the world with a daily trading volume of over $6 trillion, wherein the buying and selling of foreign currencies are not restricted to any geographical area. The forex market consists of a global network of financial centres and has no physical location or one centralized exchange. It operates for five days a week and 24 hours a day wherein currency is traded electronically, the value of which is dictated by the fluctuating foreign currency exchange rates. The forex market's importance is not just confined to larger corporations with business operations scattered across the globe, but even individuals, without even realizing it find forex significant at some point in their life due to personal or professional reasons. An Indian tourist visiting a museum in America would not be buying the entry tickets using his domestic home currency INR. The tourist would need to get the local currency exchanged to that of the country he is visiting during the international travel, which in this case would be INR to US dollars. Similarly, a company situated in the US that regularly buys cheese from France will be making the payment in Euros and not US dollars, thus requiring converting the equivalent US dollars into Euros based on the foreign exchange rate.
The foreign exchange market's participants engaged in the trade of foreign currencies include brokers, commercial banks, traders and speculators, the central bank, and the traditional users involving the students studying abroad, patients getting treated abroad, companies with global business operations and foreign tourists, etc. These participants, irrespective of their role, collectively make up the forex market. The forex market serves a multitude of purposes that can be understood by studying the role of forex in shaping economies and fulfilling individuals' and organizations' currency needs.
For example, an importer in India having trade associations with a US supplier would be required to convert an equivalent amount of Indian rupee to dollar based on the foreign exchange rates. Suppose the goods being imported by the Indian importer amounted to $ 10,000 with an exchange rate of 1 $= 73.59 INR quoted by the bank for the currency conversion, then the importer would have to pay Rs.7,35,900 for converting the equivalent INR to US dollar necessary for the payment to the supplier.
Utilizing hedging for foreign risk management against forex risks is another crucial function that the forex market serves. Any corporation or individual might encounter forex losses on their forex transactions due to the fluctuating exchange rates with movements that do not favour the parties involved. Thus to protect the bottom line of companies and ensure enhanced safety from forex exposures, the correct hedging strategies involving the right hedging tool are employed. Forward contracts are one popular way of hedging wherein the buying and selling of currencies happen at a predetermined foreign exchange rate at a specific date in the future. Thus, reducing the impact of adverse forex rates movements, especially for longer forex transactions exposed to forex volatility for a prolonged period.
Characteristics of the Foreign Exchange Market
The Forex market has high price transparency that works in favour of the traders wherein one can directly trade with the market maker. Monitoring the real-time profit/loss on open positions is accessible to traders, where they can even benefit from account tracking capability and real-time portfolio. The traders can get both indicative and executable prices from reputable brokers and access reports generated on-demand, providing all the relevant details.
The understanding of the forex market enables more informed forex decisions not just in terms of getting better forex rates to enhance savings on forex transactions but also for employing the right foreign exchange risk management strategies. Even for someone who is just starting out with online currency trading or forex trading would first require the knowledge of the forex market to further bolster their trading strategy. However, with the advancement in the finance and technology space, accessing experts has become easier, which presents a more convenient and cost-effect way to extract the most value out of one's forex transactions. Myforexeye provides a range of forex services that fulfil all the forex needs of individuals and firms, readily accessible to users via our user-friendly platforms. Whether it be for getting better forex rates through our transaction process outsourcing service, implementing correct forex risk management techniques through our services like Dr. Forex (Forex Risk Advisory) and Forex Risk Management, our services make forex simplified and profitable to our clients. Besides this, smooth and quick trade financing, secure money transfer, live forex rate updates, custom alerts, etc., are other benefits that our services extend to our clients.
Myforexeye is committed to providing a resolution to your Forex and trade finance needs and filling the gap of the unmet demands in terms of credit and financial guidance to MSMEs and larger corporates. Through our team of experienced professionals and consultants well versed in the field of forex and trade finance, we provide streamlined forex solutions for one’s convenience and at their disposal. Corroborating our efforts of providing solutions that are effective to companies for realizing their maximum potential are the latest technology and assistance from the veterans of the forex and trade finance industry. It is our objective to aid our clients in making savings and eliminating the aspect of hidden commission fees payable to the bank. Our user-friendly digital platforms - web portal and mobile app, enables one to access the best quotes for all types of forex conversions as well as avail import and export finance and calculate interest costs to make informed decisions.
Speak to one of our specialists to acquire a detailed understanding of forex solutions offered by Myforexeye.
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04 Mar 2021 03:08 PM
Contrary to popular beliefs, the forex market's importance is not just constricted to commercial banks and large corporations. The smallest of the operations involving an individual
11 Aug 2020 07:01 PM
Online currency trading platforms and a reduced barrier to entry, Forex or currency trading has witnessed a surge in individual investors' participation.
21 Jul 2020 06:13 PM
A country’s exchange rate and its imports and exports hold a complicated relationship as there is a constant feedback circuit between the way a country’s currency is valued and the international trade.
29 Jun 2020 05:35 PM
Dynamic hedging is a foreign exchange risk management strategy that allows businesses and individuals to readapt their hedging positions to evolving market conditions by providing flexible solutions to protect investments from exchange rate risks.
19 Jun 2020 05:01 PM
Management of Currency Exchange Risk is of paramount importance during turbulent times, like this pandemic. The currency fluctuations are very volatile and cannot be predicted as the circumstances are uncertain.
06 Jun 2020 03:59 PM
Outrights, in FX markets refer to the type of transactions where two parties agree to buy or sell a given amount of currency at a predetermined rate, on a specified date in future.