Did you know that forex is a portmanteau of foreign currency and all kinds of foreign exchange? Foreign exchange is a very well-known process of changing one currency into another currency for a wide variety of reasons; these reasons usually include tourism, commerce or trading. Exchange of currency is required. Even if the pandemic is going on, continues to be exchanged for all kinds of activities. Trading is one of the most important things to happen every single day in the world, and if trading needs to go on, the exchange of currency needs to go on as well. Foreign exchange markets make this a reality. Almost $5 trillion is traded on average, daily. According to a very recent try annual report from the bank for all kinds of international settlements, which happens to be a global bank for national central banks, the average trade was more than $5.1 trillion a day.
Here are some very important key takeaways. The foreign exchange, also known as the forex market, happens to be a global marketplace for all kinds of exchanging of national currencies, against one another. For example, the international exchange rate between one US dollar and one Indian rupee is: 1US dollar equals 73 Indian rupees, currently. 1GBP is equal to 95 Indian rupees.
Because of a global reach of commerce, finance, trade and more, forex markets have been known to be the largest and also very liquid, when it comes to asset markets. It has famously been called the most liquid market in the world, which is ironic, because it is also an intangible market. It does not need a physical market to function.
Did you know that most of the currencies are traded against each other as exchange rate pairs? A prevalent example would EUR/USD.
All kinds of market participants have been known to make use of forex to hedge against other international currency and the interest-rate risk, in order to speculate on all kinds of geopolitical events and also to diversify some portfolios.
Unlike the stock markets, which can be traced to the roots, even centuries, the forex market as we understand it to this day is a very new market. In a very basic sense, people convert one currency to another, for a financial advantage. Forex has been around since nations actually began minting currencies. The modern forex market happens to be a modern invention. Ever since the year 1971, most of the major currencies in the world were allowed to float freely against each other. The values of all the individual currencies very every single day and they rise and fall, without any indications.
Most of the commercial and investment banks have been known to conduct trading in forex markets.