FOREIGN EXCHANGE MARKET (FOREX). International trade and investment would not be possible without the arrangement or mechanism for buying and selling foreign currencies because Rupee is not the medium of international means of exchange.
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International trade and investment would not be possible without the arrangement or mechanism for buying and selling foreign currencies because Rupee is not the medium of international means of exchange.
The basic and primary function of a foreign exchange market is to transfer purchasing power between countries. The transfer function is performed through T.T, M.T, Draft, Bill of exchange, Letters of credit, etc
The bill of exchange is the most important and effective method of transferring purchasing power between two parties located in different countries.
An open economy introduced two kinds of monetary units instead of one:
Trading is done 24hrs a day by telephone, display monitors, fax machines and a satellite network called Society for Worldwide International Financial Telecommunications (SWIFT) which is a computer based communication system.
Obtain or provides credit for international trade transactions
Consequently their motive is not to profit but rather influence the foreign exchange value of their currency in a manner that will benefit their interests
A foreign exchange rate is the price of one currency expressed in terms of another currency
Transactions within the FOREX market are executed either on a spot basis requiring delivery two days after the transaction or on a forward basis requiring settlement at some designated future date.
European terms quotations are the foreign currency price of one US dollar. American terms are the dollar price of a foreign currency.
A cross rate is an exchange rate between two currencies, calculated from their common relationships with a third currency .
Hedgers are those who enter the forward exchange market to protect themselves against exchange rate risk.