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Overview Of The Forex Market

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The Foreign Exchange (forex) market is a worldwide financial market within which currencies are traded. A vast range of buyers and sellers trade these currencies with the aid of Financial centers. Trading occurs around the clock except on weekends. The relative values of different currencies are determined by the foreign exchange market.

The forex market allows organizations to convert currencies thereby playing a large role in the facilitation of international trade and investment. A typical forex transaction occurs when one party purchases a certain amount of one currency by paying in another currency.

This market is unique as compared to other such financial markets owing to its large trading volume which results in very high liquidity. It is also advantageous due to its geographical dispersion as well as its continuous operation.

currency markets are the most liquid market and the greater relative to other financial markets. Currencies are traded between large banks, central banks, companies, speculators, governments and other financial institutions.

There are a number of financial instruments that facilitate trading in the foreign exchange market. These include Spot transactions, foreign exchange swaps, forward contracts, currency futures, and foreign exchange options.

A spot transaction is a two-day delivery transaction. It involves a direct exchange between two currencies. This trade is made with cash rather than a contract and the interest is not included in the transaction already agreed upon.

A futures contract is similar to a futures contract where the transaction does not occur physically after the agreed date in the future. When the buyer and seller agree on a date agreed rental market interest rate on the day did not affect the transaction. Trade can take place within a day or even several years later.

The currency swap is the most common instrument for a foreign exchange trade. In this transaction, two parties exchange currencies for a certain amount of time and then reverse the transaction at a set date later on. Swaps are not traded through an exchange.

Currency futures are traded on specifically created exchanges. They are exchange traded forward transactions that have standard contract sizes and maturity dates. The average length of a futures contract is around three months. These contracts usually include interest amounts.

Derivative where the owner has the right but not the obligation to exchange money from one currency to another currency at a predetermined price on a given day has the possibility of forex. Alternatives to the money market is more liquid and larger than other options.

The Foreign Exchange market in India is regulated by the Foreign Exchange Management Acct, 1999 (FEMA) . The Forex Market in India is growing in both volume and depth since the Indian Rupee was first traded in 1994.

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