Currency Introduction, Major Currencies and Reasons For Conducting Foreign Exchange Transactions
Exchange Rate Definition
Forex (Forex) is currency trading between countries and is the largest and most liquid financial market in the world. There are an estimated 1.5 trillion US dollars worth of currency transactions in one day, dwarfing the transactions of other types of commodities. Unlike any other commodity transaction, there is no centralized transaction in foreign exchange and transactions are primarily conducted through banks, brokers, merchants, financial institutions, and individuals. Because financial institutions have this ability to trade currencies, the currency market is open 24 hours a day, 5 days a week (closed on Saturday mornings).
Before the late 1990s, currency trading was just a practice of institutional traders. Although retail traders were able to trade the forex market, it has only recently become popular, with individuals trading currencies for huge profits. Most currencies of different countries in the world float freely; this means that they retain personal value and will appreciate and depreciate relative to other currencies. Currencies are always listed in pairs because they require another currency to compare.
Reasons For Foreign Exchange Trading
There are many purposes for foreign exchange trading, and you will be surprised at the many trading levels that affect you without you even realizing it. For every purchase you make, the content, ingredients, by-products, parts or materials are not necessarily national. It can be purchased internationally, so foreign currency exchange must be carried out.
From a financial point of view, some people may trade in the foreign exchange market for huge profits. By using cross-currency pairs, they can exchange currencies for foreign currencies in the hope that the value of their own currency will depreciate, so when you exchange, you will get more income than the initial income.
A great opportunity for international importers or exporters of goods and services to enter the international market. However, with fluctuations in international exchange rates, payments can sometimes be difficult. Initially, the company sells at an agreed price, and then on the date of payment, the agreed value is significantly less than the agreed value, which is caused by currency fluctuations (called exchange rate risk).
You will find that all types of businesses, from large financial institutions to small retail freight forwarders, will conduct currency hedging. In short, these companies will take steps to ensure that the agreed payment value represents the same value on the day of payment, regardless of currency fluctuations.
Eight (8) major currencies Internationally, there are eight (8) currencies whose trading volume exceeds other currencies. They are often called professions. These coins are as follows:
Some parts of the world trade on Saturday during part of the time, because other markets are still trading on Friday. The financial institutions in these countries/regions may deal with the foreign exchange market during working hours. Therefore, the foreign exchange market is open and operates 24 hours a day, 5 days a week. For people living on the east coast of Australia, the trading hours of the relevant market are summarized as follows:
