The foreign exchange, or forex, market handles the trading of one currency with another. Though there is no physical existence of this market, the foreign exchange market is the largest financial market in the world, with its average daily traded amount reaching to US $2-2.5 trillion. The development of communication has helped the foreign exchange market more than any other field.
The computerized communication network that embraces all the major financial centers of the world is the main trait of the foreign exchange market, where the buyers and sellers of any country can trade currency quickly and efficiently.
The main players in the forex market are large banks, governments, central banks, multinational corporations, and currency speculators.
Individuals investing in the international currency market constitute a small fraction of the market.
Huge trading volume, extreme liquidity, and round the clock trading hours set the foreign exchange market apart from all other kinds of financial markets.
According to the Euromoney FX Survey carried out in May, 2006, the major market participants of forex are: Deutsche Bank, Citigroup, UBS AG, Royal Bank of Scotland, Barclays Capital, Bank of America, HSBC, Goldman Sachs, Merrill Lynch and JP Morgan Chase.
The exchange rate of a currency in the forex market depends on various factors. Some of the major factors that affect the exchange rate are: economic factors, political conditions of the corresponding countries, and market psychology. The monetary value of a currency is another major determinant of the exchange rate. Some of the most traded currencies in the foreign exchange market are the US dollar, the Japanese yen, the Euro, the Swiss franc, the British pound sterling, the Australian dollar, the Swedish krona, the Canadian dollar, the Norwegian krone, and the Hong Kong dollar.
