foreign exchange market

FOREIGN EXCHANGE MARKETRadka Hlavnová

FOREIGN EXCHANGE MARKET (FX Market, Forex Market,Currency

market) Is a form of exchange for the global

trading of international currencies An exchange market is a highly

organized market where (especially) tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought.

The market in which participants are able to buy, sell, exchange and speculate on currencies.

Market participants: Foreign exchange markets are

made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.

Firms: exporters and importersBanks: short position, long positionGovernments/monetary

authorities: Market interventions

CLASSIFICATION OF PARTICIPANTS Non-banking entitities: business

transactions and hedging Banks: foreign exchange dealers Arbitrageurs: profit seeking from

variations in rates in different markets Speculators: profit seeking from

movements in exchange rates

Exchanges can be subdivided:by objects sold: stock exchange or securities exchange commodities exchange foreign exchange market by type of trade: Spot market (immediate delivery, rates at

the time of transaction) Forward market (Contract for future

delivery) Derivatives Markets: Futures and Options

American investor need to firstly exchange USD for EUR The return of the investment depends: Not only on the performance of the stocks Also on the development on the FX Market(HEDGING)

(In order to make a responsible decision a lot of new information must be collected and analyzed)

-different techniques of foreign exchange trading- Important issue of risk and liquidity management

FX market had existed long before international porfolio investments became as widespread as today

The forex market is considered to be the largest financial market in the world.

It is important to realize that the foreign exchange market is not a single exchange, but is constructed of a global network of computers that connects participants from all parts of the world.

The average daily turnover in the global foreign exchange and related markets is continuously growing

FX market is related to export/import activities(Czech Republic- EUR/CZK exchange rate, tourism,foreign direct investments etc)

Payments of services, foreign direct investments, porfolio investments, exchange rate speculations etc.

THE MAIN TRADING CENTRES New York London Tokyo Hong Kong Singapore

Top 10 currency traders % of overall volume, May 2012

Rank Name Market share1  Deutsche Bank 14.57%2  Citi 12.26%

3  Barclays Investment Bank

10.95%

4  UBS AG 10.48%5  HSBC 6.72%6  JPMorgan 6.6%

7  Royal Bank of Scotland

5.86%

8  Credit Suisse 4.68%9  Morgan Stanley 3.52%10  Goldman Sachs 3.12%

^ Source: Euromoney FX survey FX survey 2012: The Euromoney FX survey is the largest global poll of foreign exchange service providers.'

SOURCES: Witzany J.,International Financial

Markets, VŠE., 2010 http://www.investopedia.com/terms/

forex/f/foreign-exchange-markets.asp#axzz28hv9q4nL