Foreign Exchange Market
International business is huge, worldwide trading of different goods and services by different countries. All over the world most countries are importing and exporting something everyday. Sometimes business’s will invest in other countries in different ways also. One good question is how does the money system work when buying foreign goods or services or investing in a foreign country? Most countries do accept U.S. dollars but what if you’re not from the U.S. or that country only accepts its own form of currency? This is the world foreign exchange market comes into play. The foreign exchange market also sometimes called “FX” is where countries can buy and sell different currencies. This is where we find the term exchange rate. The Exchange rate is “the price of one currency in terms of another”. (FRB of N.Y. , 2008). This is how people from one country trade with a foreign country. To make an example if Japan buys oil from Iraq more then likely the can pay for it with U.S. dollars but there own currency will not be accepted so they must use the foreign exchange market to exchange currencies.
Where is the foreign exchange market? The market actually has no main location or office. The FX is basically a worldwide network for trading. This network of people trading is done through communication of phone lines and the internet. On the other hand there are three main countries that are set up and serve as the main locations where the transactions go through. These three countries include the United States, Japan and the United Kingdom. Transactions and trades occur 24 hours a day around the clock.
Billions of dollars are traded each and every day in the FX market.
(FRB of N.Y. , 2008) ...