It stands for Foreign Exchange of currency of one country into another country’s currency for serving the meagre purpose of Trade, Commerce, Medical issues or Tourism. The “Bank for International Settlements” keeps account of the currencies being exchanged all over the world. Because of the ease with which the currencies get exchanged, Forex Market is the world’s largest and most liquid assets market. The following are few important things you need to know about the foreign exchange market.
Currency market and forex
The currencies are paired and then exchanged commonly. In terms of the Cash or Spot market, Forex exists as well and offering future options for a larger currency swap. Forex is used to incite against international currency and interest rate risks, analyse geopolitical issues, extend portfolios, etc. The feature that attracts people the most is that no particular market system waives this Exchange. Rather, the currency is traded electronically via computer networks which disallows any third-party interference in the transaction. The market also becomes very job-friendly as it is open for the whole day and five and a half days a week. This is open in almost all the famous towns across the Globe, making it even more accessible.
The Flow of the Currency in Market
After the agreement of Bretton Woods in 1791, there was an increase in the rate of currency exchange, and this flow continued to be more often further. We see that mostly Commercial and Investment Banks carry out these exchanges on behalf of their clients. Still, this exchange can also take place through Professional platforms or Individual investors. One can either earn the interest rate differential or could profit from this difference of Currencies. This is what is preferably seen when Indian currency is exchanged against Dollars etc., by foreigners. Some several acts and laws make rules regarding the foreign exchange market, also known as forex. Therefore, it is profitable to invest in the forex market.
In India, this service is taken care of by the Reserve Bank of India on behalf of the Indian Government. These can be Bonds, or Currencies, or Liquid assets, which are present in the India Currency, i.e., Rupee and in Foreign Currencies. The Reserve Bank of India makes it easy for the Currency (Rupees) volatility against any decrease or increase in interest rates. According to a circular issued by RBI, forex trading is illegal when done through the Internet or electronic trading. This trading is only possible when the requisite currency pairs against Indian Rupees. The common techniques that help one from any loss from Forex include Day Trading (Opening and Closing of the Trade on the very same day), Scalping (making small repeated trades), Position Trading (to hold on to the same position in trade for several years).
Though this is the largest hub for Currency Exchange all over the World, it is still not deep-rooted in India because people, especially Investors, find it very difficult to get convinced for such a risk-enabling task.