What is the foreign exchange market, and what are its primary characteristics?

The foreign exchange market, also known as forex or FX, is a global, decentralized, over-the-counter (OTC) market where currencies are traded. It is characterized by its immense trading volume, making it the largest financial market in the world. It operates continuously, 24 hours a day, except for weekends, and is geographically dispersed across major financial centers.

How does the foreign exchange market determine the relative value of currencies?

The foreign exchange market determines the relative value of currencies by establishing market prices for one currency when exchanged for another. It does not set an absolute value for a single currency but rather its value in relation to other currencies. For example, it might indicate that 1 US dollar is worth 1.1 Euros or 1.2 Swiss Francs.

What is the interbank foreign exchange market?

The interbank foreign exchange market is the top tier of the forex market, comprising the largest commercial banks and securities dealers. These institutions engage in very large quantities of trading, often involving hundreds of millions of dollars. It's called the 'interbank' market because banks trade directly with each other.

What role does the foreign exchange market play in facilitating international trade and investment?

The foreign exchange market is crucial for international trade and investment as it enables the conversion of currencies. This allows businesses to conduct transactions, such as importing goods or services, by paying in a different currency than their own income is denominated in. It also supports speculation and investment strategies based on interest rate differentials between currencies.

What are the unique features that distinguish the foreign exchange market from other financial markets?

The foreign exchange market is unique due to its massive trading volume, leading to high liquidity, its geographical dispersion, and its continuous operation (24 hours a day, excluding weekends). It is also influenced by a wide variety of factors affecting exchange rates, typically has lower profit margins compared to other fixed-income markets, and frequently utilizes leverage to amplify potential profits and losses.

What was the average daily turnover in the foreign exchange market in April 2022, and how does it compare to previous years?

In April 2022, the average daily turnover in the foreign exchange market was approximately $7.5 trillion. This represents a significant increase from previous years, such as $6.6 trillion in 2019 and $1.9 trillion in 2004, indicating substantial growth in trading activity.

Which financial instruments constituted the largest portion of foreign exchange trading volume in 2022?

In 2022, foreign exchange swaps were the most traded instrument by value, accounting for $3.8 trillion per day. Spot transactions followed, with $2.1 trillion traded daily, indicating the significant role of both derivative and immediate exchange instruments in the market.

When did the modern foreign exchange market begin to take shape, and what major shift in exchange rate policies occurred during that time?

The modern foreign exchange market began forming during the 1970s. This period saw countries gradually transitioning from the fixed exchange rate system established under the Bretton Woods system to floating exchange rates, allowing currency values to be determined more freely by market forces.

What was the Bretton Woods system, and how did it influence foreign exchange rates before its collapse?

The Bretton Woods system, established after World War II, was a framework for international monetary management that set rules for commercial and financial relations among major industrial states. Under this system, countries maintained fixed exchange rates, with currencies allowed to fluctuate only within a narrow band of approximately +/- 1% from their par exchange rate.

What led to the discontinuation of the Smithsonian Agreement in March 1973, and what was the consequence for currency convertibility?

The Smithsonian Agreement, which allowed exchange rates to fluctuate by up to +/- 2%, proved unrealistic for managing market pressures. Its discontinuation in March 1973 led to the end of fixed exchange rates for major currencies like the US dollar, British pound, and Japanese yen, meaning they were no longer convertible to gold.

What technological advancement significantly changed how foreign exchange trading quotes were handled in June 1973?

In June 1973, Reuters introduced computer monitors for trading quotes, replacing the previous reliance on telephones and telex machines. This technological shift streamlined the process of accessing and disseminating real-time market information.

Why were foreign exchange markets temporarily closed in 1972 and early 1973?

Foreign exchange markets were temporarily closed in 1972 and early 1973 due to the collapse of the Bretton Woods System and the European Joint Float. These closures were a consequence of major currencies beginning to float against each other, rendering the existing fixed exchange rate system unworkable.

What major change occurred in developed nations regarding state control of foreign exchange trading after 1973?

After 1973, developed nations ended state control over foreign exchange trading, ushering in the modern era of floating and relatively free market conditions for currencies. This shift allowed market forces to play a much larger role in determining exchange rates.

Which country's foreign exchange market was the largest geographic trading center in April 2022, and what percentage of the global volume did it represent?

In April 2022, the United Kingdom, primarily London, served as the largest geographic trading center for foreign exchange, accounting for 38.1% of the total global trading volume. This dominance means London's market prices often set the benchmark for currency quotes.

What are the different levels of access within the foreign exchange market, and how do spreads typically vary between them?

The foreign exchange market is structured in levels of access, starting with the top-tier interbank market where spreads (the difference between bid and ask prices) are narrowest. As access levels decrease to smaller banks, corporations, and retail traders, the spreads generally widen due to lower trading volumes and less direct market access.

What is the typical role of commercial companies in the foreign exchange market, and how do their trades affect currency rates?

Commercial companies participate in the foreign exchange market primarily to pay for goods and services acquired internationally. While their individual trades are often smaller than those of banks or speculators, their collective trade flows can significantly influence the long-term direction of a currency's exchange rate.

How do central banks attempt to influence or stabilize currency values, and what are the potential limitations of their actions?

Central banks manage currency values by influencing money supply, inflation, and interest rates, and they can use their foreign exchange reserves to intervene in the market. However, their interventions may not always be effective, as the sheer volume of the market can overwhelm even substantial central bank resources, and they lack the profit motive that drives other market participants.

What is "foreign exchange fixing," and how is it used as a market indicator?

Foreign exchange fixing refers to the daily monetary exchange rate set by a country's national bank. Central banks use this rate to evaluate their currency's behavior, and it serves as a benchmark for market trends. The mere expectation or rumor of a central bank's intervention around the fixing time can influence currency values.

What is the distinction between retail FX brokers who act as agents (brokers) versus those who act as principals (dealers/market makers)?

Retail FX brokers acting as 'brokers' serve as agents for their clients, finding the best market prices and charging a commission. In contrast, 'dealers' or 'market makers' act as principals in transactions with retail customers, quoting prices at which they are willing to trade, effectively taking the other side of the client's trade.

What are the primary functions of non-bank foreign exchange companies?

Non-bank foreign exchange companies specialize in providing currency exchange and international payment services directly to individuals and businesses. They typically aim to offer more competitive exchange rates or lower fees than traditional banks, focusing on facilitating currency transfers rather than speculative trading.

How do money transfer companies and bureaux de change differ in their services related to foreign exchange?

Money transfer companies, often used by economic migrants, handle high-volume, low-value transfers, while bureaux de change primarily serve travelers by exchanging physical currency notes. Both access foreign exchange markets through banks or non-bank companies, but their target customers and transaction types differ.

What were the top three most traded currency pairs by value in the spot market according to the 2022 Triennial Survey?

According to the 2022 Triennial Survey, the top three most heavily traded currency pairs in the spot market were EUR/USD (Euro/US Dollar) at 22.7%, USD/JPY (US Dollar/Japanese Yen) at 13.5%, and GBP/USD (British Pound/US Dollar), also known as 'cable', at 9.5%.

Which currency was involved in the highest percentage of foreign exchange transactions in April 2022?

The US dollar was involved in the highest percentage of foreign exchange transactions in April 2022, appearing in 88.5% of all trades. This highlights its dominant role in the global currency market.

What are the three main categories of factors that influence the supply and demand for a currency?

The supply and demand for a currency, and consequently its value, are influenced by three primary categories of factors: economic factors, political conditions, and market psychology. These elements interact to shape traders' perceptions and decisions.

How do a country's fiscal policy and monetary policy impact its currency's value?

A country's fiscal policy (government spending and taxation) and monetary policy (central bank actions on money supply and interest rates) significantly influence its currency's value. For instance, expansionary fiscal or monetary policies might lead to currency depreciation, while contractionary policies could strengthen it, depending on market expectations.

What is the typical market reaction to a country's widening government budget deficit?

The foreign exchange market typically reacts negatively to widening government budget deficits. This is because such deficits can signal potential economic instability or increased government borrowing, which may lead to inflation or a decrease in the currency's value as demand falls.

How does a country's balance of trade influence its currency's exchange rate?

A country's balance of trade, which reflects the difference between its exports and imports, influences its currency's exchange rate by indicating demand for its goods and services. A trade surplus generally increases demand for the country's currency, potentially strengthening its value, while a trade deficit can weaken it.

What is the relationship between inflation levels and a currency's value?

Generally, a high level of inflation within a country tends to erode its currency's purchasing power and thus its value in the foreign exchange market. However, if inflation prompts the central bank to raise interest rates, this can sometimes lead to a strengthening of the currency in the short term due to increased demand from investors seeking higher yields.

How can political instability or upheaval affect a nation's currency?

Political instability, such as frequent changes in government or social unrest, can negatively impact a nation's currency. Such conditions often create economic uncertainty, deter foreign investment, and lead traders to sell the currency, causing its value to decline.

What is meant by a "flight to quality" in the context of market psychology and currency trading?

A 'flight to quality' is a phenomenon where investors, during times of economic or political uncertainty, move their assets from perceived riskier investments to safer ones. This often results in increased demand for 'safe haven' currencies, such as the US dollar or Swiss franc, causing their value to rise relative to others.

What is the "buy the rumor, sell the fact" phenomenon in currency markets?

The 'buy the rumor, sell the fact' phenomenon describes a market tendency where a currency's price may rise in anticipation of a specific event (the rumor) and then fall once the event actually occurs (the fact). This suggests that market expectations are often priced in before the event itself.

What is a spot transaction in foreign exchange, and what is its typical settlement period?

A spot transaction in foreign exchange involves the direct exchange of one currency for another with settlement typically occurring within two business days. This is the most common type of forex trade and involves the immediate exchange of cash at the current market rate.

How does a forward transaction in foreign exchange differ from a spot transaction?

A forward transaction in foreign exchange involves agreeing on an exchange rate today for a currency exchange that will occur at a specified future date. Unlike spot transactions, the actual exchange of money does not happen until that future date, regardless of the market rates at that time, thus hedging against future rate fluctuations.

What is a non-deliverable forward (NDF), and why is it used?

A non-deliverable forward (NDF) is a derivative contract used for currencies that have trading restrictions or are not freely convertible, such as the Argentinian peso. The contract is settled in a major currency (like the US dollar) based on the difference between the agreed NDF rate and the spot rate, without the actual delivery of the restricted currency.

What is a foreign exchange swap, and how does it function?

A foreign exchange swap is a common type of forward transaction where two parties agree to exchange currencies for a set period and then reverse the transaction at a later date. These are customized agreements, not traded on exchanges, and often require a deposit to maintain the position until completion.

How do currency futures contracts differ from forward contracts?

Currency futures contracts are standardized forward contracts traded on an exchange, typically with a three-month duration. While both obligate parties to exchange currencies at a future date, futures are settled daily, which mitigates credit risk, unlike forward contracts which are settled at maturity.

What is a foreign exchange option, and what unique right does it grant the owner?

A foreign exchange option is a derivative contract that gives its owner the right, but not the obligation, to exchange a specified amount of one currency for another at a predetermined exchange rate on or before a specific date. This provides flexibility and limits potential losses to the premium paid for the option.

What is the argument that currency speculators provide a stabilizing influence on the market?

Economists like Milton Friedman argue that currency speculators ultimately stabilize markets by providing liquidity and transferring risk from hedgers to those willing to bear it. By buying undervalued currencies and selling overvalued ones, speculators are believed to push exchange rates towards their equilibrium levels.

What are the potential negative impacts attributed to currency speculation by critics?

Critics, such as Joseph Stiglitz and former Malaysian Prime Minister Mahathir Mohamad, argue that currency speculation can be destabilizing, akin to gambling, and can interfere with economic policy. They contend that speculators can exacerbate currency devaluations and economic crises, sometimes for personal profit, without contributing to productive economic activity.

What is a "carry trade" in the context of foreign exchange?

A carry trade in foreign exchange involves borrowing a currency with a low interest rate to purchase another currency that offers a higher interest rate. The goal is to profit from the interest rate differential, often amplified by using leverage.

How does leverage affect the potential profitability and risk of a carry trade?

Leverage significantly magnifies both the potential profits and losses in a carry trade. While it allows traders to control larger positions with less capital, thereby increasing potential returns from interest rate differentials, it also means that even small adverse movements in exchange rates can lead to substantial losses.

What is the role of "safe haven" currencies during times of economic or political uncertainty?

During periods of economic or political uncertainty, investors often seek refuge in 'safe haven' currencies. These are currencies perceived as stable and less likely to depreciate, such as the US dollar or Swiss franc, leading to increased demand and value for them as investors liquidate riskier assets.

How did the 2008 financial crisis illustrate the concept of risk aversion in currency markets?

During the 2008 financial crisis, despite the crisis originating in the US, the US dollar strengthened as investors moved their assets to perceived safe havens. This demonstrated risk aversion, where global equity markets fell while the dollar gained value, showing that sentiment and safety often override the origin of the crisis in currency movements.

What are the main types of financial instruments used in the foreign exchange market?

The primary financial instruments used in the foreign exchange market include spot transactions, forward contracts, non-deliverable forwards (NDFs), swaps, futures contracts, and options. Each instrument serves different purposes, from immediate exchange to hedging future risks and speculative trading.

What is the significance of the US dollar's involvement in foreign exchange transactions, as indicated by recent data?

The US dollar's significant involvement, appearing in 88.5% of transactions in April 2022, underscores its central role in the global foreign exchange market. This dominance reflects its status as a primary reserve currency and a key medium for international trade and finance.

What is the purpose of the 'nostro' account book mentioned in relation to the Medici family?

The 'nostro' account book, used by the Medici family in the 15th century, served to record amounts of both foreign and local currencies held with foreign banks. This facilitated their foreign exchange operations and managed their international financial relationships.

How did the introduction of computer monitors by Reuters in June 1973 impact foreign exchange trading?

The introduction of computer monitors by Reuters in June 1973 replaced older methods like telephones and telex for trading quotes. This technological advancement streamlined the dissemination of price information, making trading more efficient and accessible.

What is the general trend in the proportion of global foreign exchange market turnover involving the Euro compared to the US dollar between 2019 and 2022?

Between April 2019 and April 2022, the US dollar's share of global foreign exchange market turnover slightly increased from 88.3% to 88.5%, while the Euro's share decreased from 32.3% to 30.5%. This indicates a slight strengthening of the dollar's dominance relative to the Euro during that period.

What economic theories attempt to explain fluctuations in exchange rates in a floating regime?

Several economic theories attempt to explain exchange rate fluctuations in floating regimes, including international parity conditions (like purchasing power parity and interest rate parity), the balance of payments model, and the asset market model. The asset market model views currencies as assets influenced by supply and demand based on expectations of future worth.

What are some of the economic indicators that influence currency values?

Key economic indicators influencing currency values include Gross Domestic Product (GDP) growth, inflation rates, interest rates, unemployment levels, retail sales figures, and capacity utilization. These indicators provide insights into a country's economic health and growth prospects, affecting demand for its currency.

What is the significance of productivity for a country's currency value?

Increasing productivity within an economy generally has a positive impact on the value of its currency. This effect is more pronounced if the productivity gains occur in the traded goods sector, as it enhances the country's competitiveness in international markets.

Foreign Exchange Market Wiki: The Forex Nexus: A Deep Dive into Global Currency Markets

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What is Forex?

Global Decentralized Market

The foreign exchange market, commonly known as Forex or FX, is a global, decentralized over-the-counter (OTC) marketplace for the trading of international currencies. It establishes the foreign exchange rates for every currency worldwide. By trading volume, it stands as the largest financial market globally, significantly surpassing others like the credit market.^[1]

Relative Value Determination

As currencies are always traded in pairs, the market does not establish an absolute value for a currency. Instead, it determines its relative value by setting the market price of one currency against another. For example, 1 USD might be equivalent to 1.1 EUR or 1.2 CHF. This intricate system facilitates international trade and investment by enabling seamless currency conversion.^[2]

Interbank Operations

The primary participants in this market are major international banks. Financial centers act as hubs for trading activities between numerous buyers and sellers, operating around the clock, barring weekends. Behind the scenes, banks engage with specialized financial firms known as "dealers," who handle substantial trading volumes. This interbank market is characterized by large transactions, often involving hundreds of millions of dollars, and operates with minimal direct regulatory oversight due to the sovereign nature of currencies.^[1]

Historical Evolution

Ancient Roots

The practice of currency exchange dates back to antiquity. Ancient texts, such as the Talmudic writings from biblical times, mention money changers operating from stalls, even within the Temple precincts. These individuals facilitated currency exchange, often taking a commission. The need for standardized exchange was evident even then, as merchants bartered based on the gold content of coins, highlighting the early importance of relative currency values.^[4]^[5]

Medieval and Early Modern Trade

During the 15th century, prominent banking families like the Medici established banks in foreign locations to facilitate currency exchange for textile merchants. They developed sophisticated accounting methods, including the "nostro" account, to track foreign and local currency balances. By the 17th and 18th centuries, cities like Amsterdam were active Forex trading centers, demonstrating the growing integration of financial markets across Europe.^[10]^[16]

Modernization and Bretton Woods

The modern foreign exchange market began to take shape in the 1970s, following the collapse of the Bretton Woods system. This system, established after World War II, had imposed government restrictions on foreign exchange transactions and maintained fixed exchange rates. The transition to floating exchange rates marked a significant shift, increasing market activity and complexity. The introduction of electronic trading platforms, like Reuters monitors in 1973, further revolutionized how currency transactions were conducted.^[1]^[30]^[43]

Market Scale and Liquidity

Unparalleled Volume

The foreign exchange market is distinguished by its immense liquidity, making it the most liquid financial market globally. As of April 2022, the average daily turnover reached approximately $7.5 trillion USD. This vast volume is distributed across various instruments, with foreign exchange swaps and spot transactions constituting the largest portions.^[3]

Continuous Operation

A key characteristic of the Forex market is its continuous operation, functioning 24 hours a day, five days a week. Trading commences with the opening of Asian markets and progresses through European and North American sessions before returning to Asia. This constant activity ensures high liquidity and accessibility for participants across different time zones.^[1]

Geographic Dispersion

The market is geographically dispersed, with major trading centers located in London, New York City, Tokyo, Hong Kong, and Singapore. London remains the dominant hub, accounting for a significant portion of global foreign exchange trading volume. This widespread presence contributes to the market's efficiency and deep liquidity.^[3]

Key Market Participants

Banks and Dealers

The interbank foreign exchange market forms the top tier, comprising major commercial and investment banks. These institutions, along with specialized dealers, handle the largest transaction volumes. Access to liquidity often depends on established relationships and the size of trading lines, with the interbank market accounting for a substantial portion of overall transactions.^[65]

Corporations and Institutions

Commercial companies utilize Forex markets to facilitate international trade and manage currency risk associated with cross-border transactions, such as paying for imports or managing payroll. Investment management firms, including pension funds and mutual funds, engage in Forex to facilitate international securities trading and manage currency exposures for their portfolios.^[67]

Retail and Non-Bank Entities

Retail traders participate indirectly through brokers, engaging in speculative trading. Non-bank foreign exchange companies and bureaux de change cater to individuals and smaller businesses, offering currency exchange and payment services, often emphasizing competitive rates compared to traditional banks.^[71]

Factors Influencing Rates

Economic Indicators

Exchange rates are significantly influenced by macroeconomic factors. These include government fiscal and monetary policies, budget deficits or surpluses, trade balances, inflation rates, and overall economic health reflected in GDP growth and employment data. Productivity levels also play a role, particularly in the traded goods sector.^[1]

Political Stability

Political conditions, both domestic and international, can profoundly impact currency markets. Political instability, shifts in government policy, or geopolitical events can lead to currency volatility. Conversely, perceived fiscal responsibility or stability can bolster a currency's value.^[1]

Market Psychology

Trader sentiment and market psychology play a crucial role. Events triggering a "flight to quality" can drive demand towards perceived safe-haven currencies like the US dollar or Swiss franc. Trends, rumors, and the interpretation of economic data ("buy the rumor, sell the fact") can also influence short-term price movements.^[80]

Trading Instruments

Spot Market

Spot transactions involve the immediate exchange of currencies, typically settling within two business days (with exceptions for certain currency pairs). This is the most common form of Forex trading, involving the direct cash exchange of one currency for another.^[1]

Forwards and NDFs

Forward contracts allow parties to agree on an exchange rate for a future transaction date, mitigating foreign exchange risk. Non-Deliverable Forwards (NDFs) are derivative contracts used for currencies with trading restrictions, where only the price difference is settled, not the physical currency.^[83]

Swaps and Futures

Foreign exchange swaps involve exchanging currencies for a set period and then reversing the transaction. Currency futures are standardized forward contracts traded on exchanges, offering daily settlement and reducing credit risk. Both are used for hedging and speculation.^[84]

Options

Foreign exchange options grant the holder the right, but not the obligation, to exchange currencies at a predetermined rate on a specific date. The FX options market is known for its depth, size, and liquidity.

Speculation and Its Role

Stabilizing vs. Destabilizing

The role of currency speculators is a subject of debate. Proponents, like Milton Friedman, argue that speculators provide market stability by offering hedging opportunities and transferring risk. Critics, such as Joseph Stiglitz, suggest that speculation can be destabilizing and interfere with economic policy, citing instances like the 1992 Swedish interest rate hike.^[85]^[86]

Safe Havens

During periods of global economic or political uncertainty, investors often seek refuge in "safe-haven" currencies. Traditional safe havens include the US dollar, Swiss franc, and gold, which tend to appreciate as risk aversion increases. This behavior was notably observed during the 2008 financial crisis.^[91]

Technical Analysis

Many traders employ technical analysis, studying price charts and patterns to predict future currency movements. While economic and political factors drive long-term trends, short-term price action can often be influenced by chart patterns and trading algorithms.^[82]

The Carry Trade Strategy

Mechanism and Profitability

A currency carry trade involves borrowing a currency with a low interest rate to finance the purchase of another currency with a higher interest rate. The profit potential arises from the interest rate differential, which can be amplified through leverage. However, this strategy carries significant risk, as adverse exchange rate movements can lead to substantial losses.^[84]

Associated Risks

The primary risk in a carry trade is the potential for the higher-yielding currency to depreciate against the lower-yielding currency. Such a depreciation can quickly erode any interest rate gains and result in significant capital losses, especially when high leverage is employed. Market volatility and shifts in interest rate expectations are key factors influencing the success of this strategy.

Currency Market Share

Top Currencies by Trading Volume

The following table illustrates the proportion of global foreign exchange market turnover attributed to major currencies, based on data from April 2022. Note that the total percentage exceeds 100% because each transaction involves two currencies.

Most traded currencies by value
Currency distribution of global foreign exchange market turnover
Currency	ISO Code	April 2019 (%)	April 2022 (%)	Change (2019-2022)
U.S. dollar	USD	88.3%	88.5%	0.2pp
Euro	EUR	32.3%	30.5%	1.8pp
Japanese yen	JPY	16.8%	16.7%	0.1pp
Pound sterling	GBP	12.8%	12.9%	0.1pp
Renminbi	CNY	4.3%	7.0%	2.7pp
Australian dollar	AUD	6.8%	6.4%	0.4pp
Canadian dollar	CAD	5.0%	6.2%	1.2pp
Swiss franc	CHF	4.9%	5.2%	0.3pp
Hong Kong dollar	HKD	3.5%	2.6%	0.9pp
Singapore dollar	SGD	1.8%	2.4%	0.6pp
Swedish krona	SEK	2.0%	2.2%	0.2pp
South Korean won	KRW	2.0%	1.9%	0.1pp
Norwegian krone	NOK	1.8%	1.7%	0.1pp
New Zealand dollar	NZD	2.1%	1.7%	0.4pp
Indian rupee	INR	1.7%	1.6%	0.1pp
Mexican peso	MXN	1.7%	1.5%	0.2pp
New Taiwan dollar	TWD	0.9%	1.1%	0.2pp
South African rand	ZAR	1.1%	1.0%	0.1pp
Brazilian real	BRL	1.1%	0.9%	0.2pp
Danish krone	DKK	0.6%	0.7%	0.1pp
Polish zloty	PLN	0.6%	0.7%	0.1pp
Thai baht	THB	0.5%	0.4%	0.1pp
Israeli new shekel	ILS	0.3%	0.4%	0.1pp
Indonesian rupiah	IDR	0.4%	0.4%
Czech koruna	CZK	0.4%	0.4%
UAE dirham	AED	0.2%	0.4%	0.2pp
Turkish lira	TRY	1.1%	0.4%	0.7pp
Hungarian forint	HUF	0.4%	0.3%	0.1pp
Chilean peso	CLP	0.3%	0.3%
Saudi riyal	SAR	0.2%	0.2%
Philippine peso	PHP	0.3%	0.2%	0.1pp
Malaysian ringgit	MYR	0.2%	0.2%
Colombian peso	COP	0.2%	0.2%
Russian ruble	RUB	1.1%	0.2%	0.9pp
Romanian leu	RON	0.1%	0.1%
Peruvian sol	PEN	0.1%	0.1%
Other currencies		2.0%	2.4%	0.4pp
Total^[a]		200.0%	200.0%

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References

Record, Neil, Currency Overlay (Wiley Finance Series)

"Derivatives in emerging markets", the Bank for International Settlements, 13 December 2010

"The $4 trillion question: what explains FX growth since the 2007 survey?, the Bank for International Settlements, 13 December 2010

The Sunday Times (London), 16 July 2006

The Microstructure Approach to Exchange Rates, Richard Lyons, MIT Press (pdf chapter 1)

John J. Murphy, Technical Analysis of the Financial Markets (New York Institute of Finance, 1999), pp. 343â375.

What I Learned at the World Economic Crisis Joseph Stiglitz, The New Republic, 17 April 2000, reprinted at GlobalPolicy.org

Lawrence Summers and Summers VP (1989) 'When financial markets work too well: a Cautious case for a securities transaction tax' Journal of financial services

Gregory J. Millman, Around the World on a Trillion Dollars a Day, Bantam Press, New York, 1995.

A full list of references for this article are available at the Foreign exchange market Wikipedia page

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This page was generated by an Artificial Intelligence and is intended for informational and educational purposes only. The content is based on a snapshot of publicly available data from Wikipedia and may not be entirely accurate, complete, or up-to-date.

This is not financial advice. The information provided on this website is not a substitute for professional financial consultation, investment advice, or trading guidance. Always consult with a qualified financial advisor and conduct your own due diligence before making any investment decisions. Never disregard professional financial advice or delay in seeking it because of something you have read on this website.

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The Forex Nexus

💡 Dive in with Flashcard Learning! 💡

What is Forex? 🌍

🌐 Global Decentralized Market

⚖️ Relative Value Determination

🏦 Interbank Operations

Historical Evolution 📜

🏛️ Ancient Roots

👑 Medieval and Early Modern Trade

📅 Modernization and Bretton Woods

Market Scale and Liquidity 📊

💱 Unparalleled Volume

⏱️ Continuous Operation

📍 Geographic Dispersion

Key Market Participants 🤝

🏦 Banks and Dealers

🏛️ Corporations and Institutions

🧑‍💼 Retail and Non-Bank Entities

Factors Influencing Rates ⚖️

📈 Economic Indicators

🏛️ Political Stability

🧠 Market Psychology

Trading Instruments 🗂️

⚡ Spot Market

🗓️ Forwards and NDFs

🔄 Swaps and Futures

💡 Options

Speculation and Its Role 🧠

🤔 Stabilizing vs. Destabilizing

🛡️ Safe Havens

📈 Technical Analysis

The Carry Trade Strategy 💰

🔄 Mechanism and Profitability

⚠️ Associated Risks

Currency Market Share 📈

📊 Top Currencies by Trading Volume

Teacher's Corner 🧑‍🏫

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❓ Test Your Knowledge! ❓

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References

📜 References

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Disclaimer ⚠️

📜 Important Notice

Dive in with Flashcard Learning!

What is Forex?

Global Decentralized Market

Relative Value Determination

Interbank Operations

Historical Evolution

Ancient Roots

Medieval and Early Modern Trade

Modernization and Bretton Woods

Market Scale and Liquidity

Unparalleled Volume

Continuous Operation

Geographic Dispersion

Key Market Participants

Banks and Dealers

Corporations and Institutions

Retail and Non-Bank Entities

Factors Influencing Rates

Economic Indicators

Political Stability

Market Psychology

Trading Instruments

Spot Market

Forwards and NDFs

Swaps and Futures

Options

Speculation and Its Role

Stabilizing vs. Destabilizing

Safe Havens

Technical Analysis

The Carry Trade Strategy

Mechanism and Profitability

Associated Risks

Currency Market Share

Top Currencies by Trading Volume

Teacher's Corner

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Gamer's Corner

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References

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