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Radka Hlavnová. Foreign exchange market. (FX Market, Forex Market, Currency market) Is a form of exchange for the global trading of international currencies

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Radka hlavnov

Radka Hlavnová

Foreignexchange market

Foreign exchange market

(FX Market, Forex Market,Currency market)

Is a form of exchange for the global trading of international currencies

An exchangemarketis a highly organized market where (especially) tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought.

The market in which participants are able to buy, sell, exchange and speculate on currencies.

Foreign Exchange Market

Foreign exchange market


Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.

Firms: exporters and importers

Banks: shortposition, longposition

Governments/monetaryauthorities: Marketinterventions

Classification of participants

Non-bankingentitities: businesstransactions and hedging

Banks: foreignexchangedealers

Arbitrageurs: profit seekingfromvariations in ratesindifferentmarkets

Speculators: profit seekingfrommovements in exchangerates


Foreign exchange market

  • Exchanges can be subdivided:

    by objects sold:

    • stock exchange or securities exchange

    • commodities exchange

    • foreign exchange market

      by type of trade:

    • Spot market (immediatedelivery, ratesatthetimeoftransaction)

    • Forwardmarket (Contractforfuturedelivery)

    • DerivativesMarkets: Futures and Options

Foreign exchange market

  • American investor need to firstlyexchange USD for EUR  Thereturnoftheinvestmentdepends:

    • Notonly on theperformanceofthestocks

    • Also on thedevelopmentonthe FX Market


      (In order to make a responsibledecisionalotof new informationmustbecollected and analyzed)


      - Importantissueof risk and liquiditymanagement

Foreign exchange market

FX market had existedlongbeforeinternationalporfolioinvestmentsbecameaswidespreadastoday

The forex market is considered to be the largest financial market in the world.

It is important to realize that the foreign exchange market is not a single exchange, but is constructed of a global network of computers that connects participants from all parts of the world.

The average daily turnover in the global foreign exchange and related markets is continuously growing

Foreign exchange market

FX marketisrelated to export/import activities

(CzechRepublic- EUR/CZK exchange rate, tourism,foreigndirectinvestmentsetc)

Paymentsofservices, foreigndirectinvestments, porfolioinvestments, exchange rate speculationsetc.

The main trading centres

New York






Foreign exchange market

^ Source: Euromoney FX survey FX survey 2012: The Euromoney FX survey is the largest global poll of foreign exchange service providers.'


WitzanyJ.,InternationalFinancialMarkets, VŠE., 2010