Most commercial cross-border transactions require currency conversion by one of the parties. Business deal can be a source for the sale of goods to another country, or buy imported goods from another country, or a company or country to invest in another country.
All buying and selling of foreign currency operations occur in the 24-hour mobile technology in the foreign exchange market. This market is a network of foreign currency traders all over the world who are connected by telephone lines and computers. These traders are working mostly for financial institutions such as banks or financial shops, some work in the treasury departments of large companies, and these days more and more individuals have opened online foreign currency account and use foreign currency trading platform over the Internet to conduct foreign currency trading over the Internet.
There are no foreign exchange market as a central point, but there are three main centers of trade is the United Kingdom, the United States and Japan. These centers are dealing with up to 60% of all foreign exchange transactions carried out daily, with treatment 33% in the volume of daily trading in all parts of the world than 1200 billion dollars.
Participants in the foreign exchange markets:
- They are five main participants in the foreign exchange market.
- Banks and financial institutions is one of the largest participants in the foreign exchange markets, mostly in the buying and selling of foreign currencies among themselves to make a profit. In fact two-thirds of all foreign exchange transactions are banks that deal directly with each other.
- Brokers act as intermediaries between the customer and the bank and generally charge a commission on transactions that result.
- Customers are mainly large companies who need foreign currency to buy and sell goods or invest in other countries. It can also be high net worth individuals who invest in other countries.
- Central banks intervene in the foreign exchange market to influence the value of their currencies.
- Now individuals can open foreign currency accounts online and conduct foreign currency trading over the Internet.
- With high trading volumes in the foreign exchange market for the price of currency pairs change throughout the trading day and this activity can be positive (the currency strengthens) or negative (weaken the currency) on the currency.
Participants in the foreign exchange market in the market to buy foreign currency they need to buy goods and services from other countries. To protect (cover) itself against the change in the exchange rate. Or, to earn a profit in the short term from changes in exchange rates.
Determine foreign exchange rates
Exchange rates move in response to several economic factors and speculation. However, in the end, currency traders respond to supply and demand factors that are at the heart of this complex market and all the other free market. If demand for the currency is the largest of all the display will boost the currency. If the supply of currency is greater than demand will weaken the currency. Some of the factors that can affect the supply and demand for a particular currency are:
- Economic News
- Political events
- International Investment
- Economic cycles
- Government policies
- New tax laws
- Economic statistics
In public money flowing towards a higher rate of return is, of course, the least amount of risk, in times of political turmoil flows of funds tend to go to safe havens like the US dollar and the Pound.