Foreign exchange market or forex market handles the trading of one currency with another. Though there is no physical existence of this market, foreign exchange market is the largest financial market in the world with its average daily traded amount reaching to US$ 2-2.5 trillion.
Foreign exchange market is a market for converting the currency of one country into that of another. If the development of communication has helped any field the most, it is certainly the foreign exchange market. 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 the currency quickly and efficiently. Following the huge amount of transaction that is carried out in the foreign exchange market, the main players in the forex market are large banks, governments, central banks, multinational corporations and currency speculators. The individuals investing in the international currency market make a small fraction of the foreign exchange market.
Due to the huge trading volume, extreme liquidity and round the clock trading hours, the foreign exchange market stands apart from any other kind 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 one 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 money value of one currency is another major determinant of the exchange rate. Some of the most traded currencies in foreign exchange market are US dollar, Japanese yen, Euro, Swiss franc, British pound sterling, Australian dollar, Swedish krona, Canadian dollar, Norwegian krone and Hong Kong dollar.
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