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About Foreign Exchange

The Forex market is the largest and most liquid market in the world. Check out this power point presentation which lists down various important information on foreign exchange and who uses this platform.

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About Foreign Exchange

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  1. About Foreign Exchange

  2. About Foreign Exchange Basically, the Forex (Foreign Exchange) market is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is the largest and most liquid market in the world. Here is a little more about foreign exchange.

  3. Foreign Exchange Market • In today’s global market place, foreign exchange plays a significant role: 4 trillion US dollars’ worth of currency is exchanged on a daily basis • Prices available 24 hours a day, 7 days a week • No formal exchange for currencies. Trading is done over the counter in an interbank market and via brokers • In this highly dynamic environment, global presence, extensive footprint, and local knowledge are characteristics to look for in your trade bank

  4. Who Uses Foreign Exchange? • Importers/Exporters - Importers pay in the foreign currency, exporters receive payment in foreign currency • Multinational corporations - Multinationals fund foreign subsidiaries and funds are repatriated back to parent companies • International investors - International investors hedge interest payments with forwards • Tour operators - Tour operators book foreign travel in the local currency • Schools- Schools make and receive tuition payments in foreign currency

  5. Bottom Line • Hedging can eliminate the uncertainty of the forex rate that will be used by a company in the future • A foreign exchange forward contract allows a company to pay or receive foreign currency in future at an exchange rate that is agreed upon today • By locking in the rate, a company can protect profits margins and eliminate uncertainty of the value of cash flows • A company can know exactly how many US dollars they will pay or receive in the future; thus, they can better forecast their business’ cash flow cycle and plan operations accordingly

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